New York Attorney General Eric Schneiderman. Photo: Reuters/Brendan McDermid
New York Attorney General Eric Schneiderman. Photo: Reuters/Brendan McDermid

American and Canadian securities regulators have launched dozens of investigations into alleged crypto-currency scams.

A task force known collectively as “Operation Crypto-sweep,” has been convened by the North American Securities Administrators Association (NASAA). It has launched 70 investigations since April, with 35 already completed or pending enforcement actions.

As yet, the NASAA, which is a group of US and Canadian state-level securities regulators who work to protect investors from fraud, has given no indication what these enforcement actions might consist of.

The actions taken to date “are just the tip of the iceberg,” said Joe Borg, NASAA president and director of the Alabama Securities Commission, at a press conference in Washington on Monday.

Regulators from 44 jurisdictions have so far sent 32 sets of cease and desist letters to dozens of entities or individuals associated with the alleged schemes, as well as another 14 sets of “information demand letters”.

Some of the cease and desist letters allege fraud while others accuse the recipients of offering “unregistered securities”. The information demand letters, sent to some of the biggest crypto-currency exchanges in the world, were part of actions initiated by New York State Attorney General Eric Schneiderman in April.

The Attorney General then sent questionnaires to 13 major exchanges – including to Binance, that is the world’s biggest and also Coinbase, the biggest by-volume exchange in the US – asking who owns them, how they trade and how they charge.

As reported by Asia Times, the questionnaires asked the exchanges “to disclose information falling within six major topic areas: (1) Ownership and Control, (2) Basic Operation and Fees, (3) Trading Policies and Procedures, (4) Outages and Other Suspensions of Trading, (5) Internal Controls, and (6) Privacy and Money Laundering.”

Operation Crypto-sweep will now see multiple state and provincial regulators coordinating their actions alongside federal agencies, namely the Securities and Exchange Commission and the Commodity Futures Trading Commission.

“The persistent exploitation of the crypto ecosystem by fraudsters is a significant threat to Main Street investors in the United States and Canada,” said Joe Borg, adding that regulators working on Operation Crypto-sweep are now asking the North American public to come forward with information on other potential scams while also urging investors to be vigilant in seeking investments in this sector.

“Not every ICO or cryptocurrency-related investment is fraudulent, but we urge investors to approach any initial coin offering or cryptocurrency-related investment product with extreme caution,” Borg said, noting that the task force had found approximately 30,000 crypto-related domain name registrations, the vast majority of which appeared in 2017 and 2018.

Borg added that Operation Crypto-sweep has been modeled on the NASAA-led state and provincial fight against web stock fraud that spiked during the bubble in the late 1990s.

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