More than 100 investigators on the North American Securities Administrators Association (NASAA) COVID-19 Enforcement Task Force have identified 91 alleged COVID-19-related investment schemes since the task force was formed in April.

Task force investigators have uncovered a variety of investment-related schemes, many involving cryptocurrencies or promoting private offerings outside of the stock market, said Joe Rotunda, Director of Enforcement for the Texas State Securities Board and vice chair of NASAA’s Enforcement Section. Other investment opportunities include oil and gas ventures, real estate, penny stocks, precious metals, and investments in the foreign exchange markets.

To date, state and provincial securities investigators have identified 91 investment-related matters as potentially fraudulent, have issued 15 cease and desist orders, 8 caution letters and have made 26 referrals to other regulatory agencies including the Securities and Exchange Commission. The task force members are working on 54 active and open investigations, NASAA said in a new release.

“Based on the pitches investigators have seen, suspects appear to be targeting seniors and individuals with portfolios that are losing or have lost value due to current economic conditions,” Rotunda added.

Currently, more than 100 investigators from 44 jurisdictions in the United States, Canada and Mexico, are participating in the task force to identify and stop potential threats to investors stemming from the pandemic, NASAA said.

Joseph P. Borg, Director of the Alabama Securities Commission and chair of NASAA’s Enforcement Section, said investigators are ramping up online investigative techniques to identify websites and social media posts that may be offering or promoting fraudulent offerings, investment frauds, and unregistered regulated activities. “State and provincial securities regulators are protecting investors by preemptively identifying fraudulent conduct that could cause investor losses,” Borg said.

Since the start of the Covid-19 pandemic, Borg said he has seen a rise in financial schemes being advertised online with fraudsters preying upon the fear of an uncertain financial future and the volatile stock market.

Alabama has issued a number of cease and desist orders against alleged scam artists including one against Johnnie Dancy, who ran an investment scheme on Craigslist promising $5,000 in weekly profits and 400% to 1000% returns to investors based on penny stocks he said were profiting from the coronavirus. Neither he nor the stocks he was touting were registered with the Alabama Securities Commission, prompting the agency to issue the cease-and-desist order halting transactions.

“The worldwide internet is teeming with claims of grandiose profits to be made by capitalizing on public fear about the Coronavirus (COVID-19),” said ASC Director Joseph P. Borg. “There is nothing about the pandemic that changes the risk always present when making investment decisions. If anything, claims by individuals that they can predict the future of this disease and how it will impact markets should cause potential investors to run, not walk, away from these types of advertisements and offers.”

Alabama and the Texas State Securities Board obtained a cease and desist order against Ultra BTC Mining LLC, a cryptocurrency company, that had already raised $18 million from unsuspecting state residents.  The company promised to double investors’ money in one year while also claiming to contribute money to UNICEF to “fight COVID-19,” according to the emergency action.

Ultra Mining, however, refused to provide any information that verifies the donation or disclose its principals or financials, according to the order. Neither Ultra Mining or its promoter are registered to sell securities in Texas, are also failing to disclose the principals or financials of its cryptocurrency mining operation.

“By deploying various open source intelligence technologies, electronic collaboration tools as well as novel web crawling and scraping approaches, we have been able to provide intelligence and resources to investigators to help them conduct online investigations, as well as  share and aggregate information about this international enforcement initiative,” said Jake van der Laan, Director of Information Technology & Regulatory Informatics, with the New Brunswick Financial & Consumer Services Commission and chair of NASAA’s Enforcement Technology Project Group.

Other NASAA task force enforcement investigations include:

• A promoter who targeted retirees and investors in need supplemental income “due to crash in the economy,” and touted his ability to capitalize on volatility in the markets to make lucrative guaranteed returns.
• An advertisement posted on Craigslist that encourages prospective clients to “exploit the current coronavirus crises by trading penny stocks from the pharmaceutical and biotechnology industry whose stocks are experiencing significant price fluctuations due to the pandemic.”

The NASAA task force is also working with the Securities and Exchange Commission, which on June 11 obtained an asset freeze against five individuals and six offshore entities for an alleged scheme that generated more than $25 million from unsuspecting investors nationwide who were victimized by illegal sales of multiple microcap companies, including four companies that are the subject of SEC trading suspensions.

To capitalize on the COVID-19 pandemic, the Canadian citizens alleged in promotions that Sandy Steele Unlimited Inc, could produce medical quality facemasks and that WOD Retail Solutions, Inc. had automated kiosks for retailers to use in response to the COVID-19 pandemic. Both companies are under SEC trading suspensions.