Despite Taking Down 90 Crypto Scams, US Regulators Recovered Just $36 Million for Victims

Journalist:
Mark Emem @cointributor
December 28, 2018

Regulators in the United States have filed over 90 cryptocurrency fraud cases in the last two years, the Wall Street Journal reports.

While it is difficult to determine the amount that investors have lost, regulators at both the federal and state level have only managed to get back US$36 million, a figure considered paltry. What has made it difficult to trace funds is the anonymous and borderless nature of cryptocurrencies.

An analysis conducted by the Journal also found that fewer cases were filed by the regulators when prices were reaching record highs compared to the number that of cases that were filed as the market took a bearish turn. Last month, the U.S. Securities and Exchange Commission (SEC) for instance filed five cases while in the entire 2017, only four cases were filed.

No Reprieve for Investors

State regulators have on the other hand brought over 70 cryptocurrency-enforcement actions in the past year, though none of the actions has resulted in investors getting their money back.

Among the most prominent alleged frauds was BitConnect which is under investigation by both the SEC and state regulators. After reaching approximately US$2.8 billion in market value, BitConnect’s flameout begun upon shutting down operations following a cease-and-desist order issued by the Texas State Securities Board (TSSB) in January as CCN reported.

At the time, the TSSB accused BitConnect of violating some sections of the Texas Securities Act which prohibit the selling of securities without the authority of the state’s Securities Commissioner.

It is therefore ORDERED that Respondent BitConnect immediately CEASE and DESIST from offering for sale any security in Texas until the security is registered with the Securities Commissioner or is offered for sale pursuant to an exemption from registration under the Texas Securities Act.

A report released by the TSSB at the time accused BitConnect of engaging in fraud by virtue of the fact that it concealed the identities of the firm’s principals as well as failing to reveal how it would generate revenues to pay investors the promised annual interest rate of 120%.

Crypto Fraud Lawsuits

Besides the actions of the regulators, lawsuits against purported cryptocurrency fraud schemes have also increased dramatically in the past year. As CCN reported in September, the number of cryptocurrency lawsuits rose threefold in the first half of 2018 compared to the entire 2017 per a report compiled by legal analytics firm Lex Machina:

The first two quarters of 2018 saw a significant rise in the number of securities cases relating to cryptocurrency or Bitcoin. Using Legal Analytics’ keyword search functionality, Lex Machina discovered case filings relating to this emerging area surged from seven cases in Q4 2017 to 22 cases in Q1 2018 Q1 and 23 cases in Q2.

Featured image from Shutterstock.

Last modified (UTC): December 27, 2018 22:49

Mark Emem @cointributor

After words, numbers are my other love... mostly when they are going up and they have nothing to do with taxes or expenses. That makes green my favorite color! Currently a resident of Nairobi, Kenya. Follow me on Twitter @cointributor or email kointributor[at]gmail.com