As regulators pine over the safety of Libra, recent crypto-related crimes are sure to keep them on edge. New Jersey Attorney General Gurbir Grewal filed a lawsuit on Wednesday against Princeton-based company, Pocketinns Inc.
Pocketinns and their president, Sarvajnya Mada, allegedly failed to register with the Bureau of Securities before selling $400,000 of unregistered securities. Mada sold the securities in January of 2018 in the form of a cryptocurrency called “PINNS tokens.”
Of the 217 investors who purchased the tokens, only 11 verified themselves as “accredited investors.”
Paul Rodríguez, Acting Director of the Division of Consumer Affairs, explains the issue:
“By failing to take reasonable steps to verify that purchasers were accredited investors capable of bearing the increased risks associated with unregistered securities, the defendants violated the law and exposed investors to financial losses that could have been devastating.”
Attorney General Grewal hammered home the point:
“The lawsuit we filed makes it clear that individuals selling cryptocurrency-related investment products in New Jersey must comply with the law or face serious consequences.”
News of this violation comes just days after masked thieves attempted to steal a crypto ATM in the UK. The robbers tried to pull the ATM away with their car but ultimately failed.
Add on to this, the recent news of Japanese crypto exchange Bitpoint losing over $20 million of crypto holdings from over 50,000 customers. It appears as the world of crypto could be dangerous.
It’s not a stretch to see why so many regulators are taking the ax to Libra, Facebook’s developing new cryptocurrency.
Steven Mnuchin, the United States Secretary of the Treasury, recently said that cryptocurrency is a “national security issue.” He added,
“Cryptocurrencies such as bitcoin have been exploited to support billions of dollars of illicit activity like cybercrime, tax evasion, extortion, ransomware, illicit drugs, and human trafficking. Many players have attempted to use cryptocurrencies to fund their malignant behavior. This is indeed a national security issue.”
While cryptocurrency creates new vulnerabilities that need to be addressed, how does it compare to the current government-regulated monetary systems?
Meanwhile, major institutions such as Deutsche Bank face FBI investigation for failing to comply with anti-money laundering laws. Employees allegedly flagged suspicious activities to their superiors who then failed to report the activities to the government. The German lender was also fined nearly $700 million in 2017 for allowing over $10 billion worth of money-laundering in Russia.
Violations such as these have become commonplace for United States-based companies as well. Goldman Sachs CEO David Solomon apologized to the people of Malaysia earlier this year for their role in the 1MDB scandal. The scandal involved $2.7 billion of misappropriated funds.
And then, of course, there are the numerous Wells Fargo debacles. The fourth-largest bank in the United States has racked up almost $15 billion in fines since the year 2000. These fines link to violations around mortgage abuses, false claims, consumer protection violations, price-fixing, and more.
It makes you wonder… If a new cryptocurrency made their pitch as potentially allowing for billions of dollars in money-laundering, bankruptcy fraud, and human error, how would Mnuchin and other regulators react?
Many cryptocurrencies and blockchain companies attempt to take trust and human error out of the equation completely. While the technologies still have many kinks to work out, it’s hard to say they’re inherently more dangerous than the current system.
Last modified: January 10, 2020 2:17 PM