US and Canadian securities regulators joined forces to launch a far-reaching crackdown on initial coin offering (ICO) and cryptocurrency scams across North America in an operation dubbed “Cryptosweep.”
First reported on May 21 by the Washington Post, Operation Cryptosweep was revealed by the North American Securities Administrators Association (NASAA) on Monday. Later releases from the Tennessee Department of Commerce and Insurance (TDCI) as well as the Texas State Securities Board (TSSB) provided additional details.
Citing the NASAA, the Washington Post reported that “as many as 70 investigations were opened” in the frame of Operation Cryptosweep, while “as many as 35 cases are pending or already completed.” Some of the cases have resulted in “cease-and-desist letters warning the alleged schemes that their unregistered activity violates state securities law.”
The investigations took a special interest in suspicious ICO projects. NASAA President Joseph Borg noted that while many ICOs are not fraudulent, “consumers face higher risks of being misled,” especially during the cryptocurrency craze, when many retail investors “take extreme steps to gain exposure to the currency, such as taking out a bigger mortgage.”
According to the Washington Post, investigators “posing as members of the public” revealed alleged scams that “use fake addresses, slick marketing materials and promises of over 4 percent daily interest,” while some have even “used unauthorized photos of high-profile individuals,” such as Prince Charles, Supreme Court Justice Ruth Bader Ginsburg, and Jennifer Aniston.
Whilst targets of the investigation have up to a month to file a response, investigators can always take alleged scammers to court, a long and costly process. Regulators “expect many sites to shut down voluntarily or amend their practices to comply with securities laws.”