State and provincial securities regulators have more than 200 active investigations initial coin offerings (ICOs) and crypto-currency investment products underway, the North American Securities Administrators Association’s (NASAA) announced Tuesday.
Since its launch in May, “Operation Cryptosweep” has resulted in 46 enforcement actions. The investigations are uncovering suspected fraud, along with numerous other possible securities law violations, such as registration and prospectus violations.
“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,” says Joseph Borg, NASAA president, in a statement.
NASAA stresses that ICOs and other cryptoinvestments that qualify as securities must either be registered, or qualify for an exemption, in order to be offered to investors.
However, “even registered offerings can be fraudulent,” NASAA says in a news release, cautioning investors to carry out their own due diligence before investing in any product.
“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,” Borg adds.