More than 200 Active Investigations by State and Provincial Securities Regulators
WASHINGTON, D.C. (August 28, 2018) – The North American Securities Administrators Association (NASAA) today announced that more than 200 active investigations of Initial Coin Offerings (ICOs) and cryptocurrency-related investment products are currently underway by state and provincial securities regulators in the United States and Canada as part of NASAA’s ongoing initiative “Operation Cryptosweep.”
Since its launch in May, this ongoing coordinated regulatory focus has resulted in 46 enforcement actions involving ICOs or cryptocurrency-related investment products.
“State and provincial securities regulators are committing significant regulatory resources to protect investors from financial harm involving fraudulent ICOs and cryptocurrency-related investment products and also are raising awareness among industry participants of their regulatory responsibilities,” said NASAA President and Alabama Securities Commission Director Joseph P. Borg.
Borg noted that while some of the enforcement investigations initiated as part of Operation Cryptosweep involve suspected securities fraud, regulators are finding many other potential violations of state and provincial securities laws, including failure to properly register a product before it was offered to investors.
“While not every ICO or cryptocurrency-related investment is a fraud, it is important for individuals and firms selling these products to be mindful that they are not doing so in a vacuum; state and provincial laws or regulations may apply, especially securities laws. Sponsors of these products should seek the advice of knowledgeable legal counsel to ensure they do not run afoul of the law. Furthermore, a strong culture of compliance should be in place before, not after, these products are marketed to investors.”
If these products qualify as securities, they should be registered with the appropriate regulatory agencies or qualify for an exemption from registration. The registration process provides some protection for investors by subjecting the offering to regulatory review. But even registered offerings can be fraudulent. Investors therefore should perform their own thorough due diligence before investing in any ICO or cryptocurrency-related product.
“Be cautious when dealing with promoters who claim their ICO offering is exempt from securities registration but do not ask about your income, net worth or level of investing sophistication,” Borg said. “Do your homework and contact your state or provincial securities regulator with any concerns before parting with your hard-earned money – afterwards may be too late.”
Contact information for all state and provincial securities regulators is available on the NASAA website, www.nasaa.org.
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Bob Webster | Director of Communications