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‘Operation Cryptosweep’ Actively Investigating 200 ICOs and Cryptocurrency Firms

Last Updated March 4, 2021 3:34 PM
Josiah Wilmoth
Last Updated March 4, 2021 3:34 PM

An international task force targeting securities violations in the cryptocurrency industry has now opened active investigations into more than 200 initial coin offerings (ICOs) and investment products.

First launched in May by the North American Securities Administrators Association (NASAA), “Operation Cryptosweep” has already brought 47 enforcement actions against ICOs and firms offering cryptocurrency investment products in the U.S. and Canada, earning praise from Securities and Exchange Commission (SEC) Chairman Jay Clayton in the process.

“State and provincial securities regulators are committing significant regulatory resources to protect investors from financial harm involving fraudulent ICOs and cryptocurrency-related investment products and also are raising awareness among industry participants of their regulatory responsibilities,” said NASAA President and Alabama Securities Commission Director Joseph P. Borg.

He added:

“While not every ICO or cryptocurrency-related investment is a fraud, it is important for individuals and firms selling these products to be mindful that they are not doing so in a vacuum; state and provincial laws or regulations may apply, especially securities laws. Sponsors of these products should seek the advice of knowledgeable legal counsel to ensure they do not run afoul of the law. Furthermore, a strong culture of compliance should be in place before, not after, these products are marketed to investors.”

Eleven of those enforcement actions have been levied by regulators in Texas, with the State Securities Board reporting that it had halted schemes “in which companies claimed to have raised billions of dollars from investors.”

Joseph Rotunda, director of enforcement at the Texas State Securities Board, said an in emailed statement that the investigation had turned up a “staggering” amount of illegal activity in the cryptocurrency space, ranging from ICOs that had deceptively used the likenesses of actress Jennifer Aniston and Supreme Court Justice Ruth Bader Ginsburg in their marketing materials to investment promoters who had used stock videos to make it appear like the company was running three cryptocurrency mining farms.

He concluded:

“The work is far from complete, but state and local regulators will continue to conduct sophisticated investigations and bring appropriate enforcement actions to promote confidence and security in the market for investments tied to cryptocurrencies.”

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