RICHMOND — The State Corporation Commission’s (SCC) Division of Securities and Retail Franchising is among more than 40 state and provincial regulators who are participating in a crackdown on fraudulent Initial Coin Offerings (ICOs) and cryptocurrency-related investment products in the United States and Canada. The crackdown, dubbed “Operation Cryptosweep,” is being coordinated by the North American Securities Administrators Association (NASAA), of which the SCC is a member.
Cryptocurrencies are digital assets created by companies or individuals that take the form of a virtual coin or token. These risky and often volatile products are not insured or controlled by central banks or other governmental authorities, exist only on the internet and are subject to minimal regulatory oversight.
“Fraudulent activity involving ICOs and cryptocurrency-related investment products is a significant threat to Main Street investors in Virginia,” said SCC Securities Director Ron Thomas. “Cryptocriminals should be on alert that the SCC is committed to swiftly and effectively protecting investors from schemes and scams involving these products.”
In April 2018, NASAA organized a task force of its member state and provincial securities regulators to begin a coordinated series of investigations into ICOs and cryptocurrency-related investment products. Regulators identified many cryptocurrency-related products and, as part of its work, the task force identified hundreds of ICOs in the final stages of preparation before being launched to the public. These pending ICOs were advertised and listed on ICO aggregation sites to attract investor interest. Many have been examined and some were determined to warrant further investigation.
So far, “Operation Cryptosweep,” has resulted in nearly 200 investigations and 47 completed or pending enforcement actions in the United States and Canada since May 2018. These actions are in addition to more than a dozen enforcement actions previously undertaken by NASAA members regarding these types of products. The SCC’s Securities Division has several ongoing investigations into ICO offerings of cryptocurrencies in Virginia as part of “Operation Cryptosweep.”
“The actions of this sweep are just the tip of the iceberg,” Thomas said, noting that NASAA’s task force also found approximately 30,000 crypto-related domain name registrations, the vast majority of which appeared in 2017 and 2018.
A critical component of “Operation Cryptosweep” is raising public awareness of the risks associated with ICOs and cryptocurrency-related investment products. “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,” Thomas said.
For more information, call the SCC’s Division of Securities and Retail Franchising in Richmond at 804-371-9051 or toll-free (in Virginia) at 1-800-552-7945. You may also visit the division’s website at www.scc.virginia.gov/srf or visit the North American Securities Administrators Association’s website at www.nasaa.org