With the volatile market for cryptocurrencies sizzling, state securities regulators announced last week that they have opened 130 new cryptocurrency-related investigations and have brought 35 enforcement actions since the beginning of 2019.
The investigations are part of the North American Securities Administrators Association’s Operation Cryptosweep, which has led to 85 pending or completed enforcement actions involving initial coin offerings since the task force was launched in 2018, the NASAA said in a statement.
The ongoing coordinated regulatory sweep includes regulators from 40 states and provinces in the United States and Canada focusing on initial coin offerings (otherwise known as “ICOs”) and other cryptocurrency products.
“Recent headlines of potentially new cryptocurrency products, the near tripling in value of some cryptocurrencies and the sharp increase in market capitalization for all cryptocurrencies are again creating an environment that attracts white-collar criminals, bad actors and other promoters of illegal and fraudulent securities schemes,” NASAA President Michael S. Pieciak said.
Facebook’s plan to launch a digital currency to allow its billions of users to make financial transactions across the globe is also “creating an environment that attracts white-collar criminals, bad actors and other promoters of illegal and fraudulent securities schemes,” added Pieciak, who is also the commissioner of Vermont’s Department of Financial Regulation.
While Facebook originally intended to launch its Libra cryptocurrency by the first half of 2020—targeting 1.7 billion potential users who don’t have a bank account—a multitude of fake accounts and scams are already online attempting to sell supposed Libra coins on Facebook’s own platform. The fraudulent offers are also prominent on Instagram, YouTube and other social media platforms, regulators said.
The NASAA noted that while some of its members’ investigations involve suspected securities fraud, the investigations are also finding many other violations, including failure to register products before offering.
Both advisors and investors “should be mindful of the hype and be aware of the risks when considering whether to jump into cryptocurrency-related investment products,” Pieciak said.
To help raise investor awareness, the NASAA is releasing the third in its “Get in the Know” video series, which features common crypto investment schemes and features of cryptos that investors should consider, including these facets:
They are volatile: Cryptocurrency markets are highly volatile, making them unsuitable for most investors looking to meet long-term savings or retirement goals.