U.S. state and Canadian securities regulators, continuing their crackdown on questionable cryptocurrency-related investments, have taken 47 enforcement actions against fraudulent investment promoters and opened more than 200 investigations since May 1.
The North American Securities Administrators Association (NASAA), an organization of all U.S. state and Canadian provincial regulators, launched the regulatory sweep in response to a speculative mania in virtual currencies and investments tied to them.
In the last six months of 2017 the price of one bitcoin increased from $2,364 to an all-time high of $19,205, driving an increase in promoters illegally and fraudulently using online advertising, social media, and other public solicitations to attract investors. By the end of 2017 the market capitalization of all cryptocurrencies had skyrocketed to more than $500 billion.
In the regulatory sweep securities regulators uncovered extensive fraud in the market for Initial Coin Offerings and other suspect cryptocurrency offerings.
“We have learned that bad actors are leveraging widespread interest in cryptocurrencies to defraud the investing public,” said Texas Securities Commissioner Travis J. Iles. “We’ll continue to conduct thorough investigations, secure evidence and bring enforcement actions to protect Texans.”
The investigations found that many promoters were not complying with registration laws and were concealing important information from investors, including the significant risks in cryptocurrency markets and the true identities of the managers of the investment programs.
In December Commissioner Iles entered an emergency order against USI-Tech, which was the first state action taken against a fraudulent promoter of cryptocurrency-tied investments.
The State Securities Board has taken a total of 11 enforcement actions against cryptocurrency promoters, effectively halting schemes in which companies claimed to have raised billions of dollars from investors.