The North American Securities Administrators Association (NASAA) reported on Thursday that its COVID-19 Enforcement Task Force has taken action to disrupt or deter 250 fraudulent schemes seeking to profit from the pandemic.
To date, state and provincial securities investigators have uncovered 262 schemes to defraud investors and consumers, including 168 investment-related schemes and 94 non-investment schemes, said Lisa A. Hopkins, president of the NASAA, in a statement.
“The objective of the task force is to proactively detect Covid-19-related threats to investors, including but not limited to fraudulent offerings, investment frauds and unregistered regulated activities, within the jurisdiction of NASAA member states and provinces, and to disrupt and deter those activities,” said Hopkins, who is also the senior deputy securities commissioner for West Virginia.
To disrupt these schemes, state regulators have obtained emergency cease-and-desist orders, undertaken administrative actions, sent out enforcement referrals to other regulators and notifications to social media and hosting companies where scam artists troll for victims, the association said.
Con artists have long followed headlines, using current events to give their schemes an air of legitimacy. The pandemic is no exception.
In one of the Covid task force’s 250 cases, the Texas State Securities Board issued an emergency cease-and-desist order against Boca Raton, Fla.-based operator James Frederick Walsh, who used online chat rooms to target Houston investors with guaranteed 8% to 11% returns from his “master” trading program. Walsh, an unregistered broker, deducted 40% fees and also persuaded investors to pay additional $150 monthly fees to finance what he said was his need for data to achieve his trading strategies, regulators said.
With 111 investigators in 44 jurisdictions in the United States, Canada and Mexico, the COVID-19 Task Force represents the largest coordinated enforcement initiative undertaken by state and provincial securities regulators.
The task force said it had disrupted a gamut of questionable activities. These include solicitations for investments in medical technology or health-care companies, where membership units in general or limited partnerships have been offered. The task force has also rooted out questionable offerings in penny stocks, private placement offerings, initial coin offerings, cryptocurrency-related investments and crowdfunding, the NASAA said.
“As with any investment opportunity, investigate independently before you invest, and contact your state or provincial securities regulator with any concerns before parting with your hard-earned money,” Hopkins said.
The task force is also examining a spike in internet domain names linked to the pandemic. It has identified as many as 200,000 coronavirus-related domains appearing to have been created since the beginning of 2020.