Operation Cryptosweep: World’s largest ICO crypto securities sweep announced
After many warnings of a crackdown, Operation Cryptosweep is putting the clamps on shady ICOs.
On 21 May 2018, the North American Securities Administrators Association (NASAA) announced Operation Cryptosweep, one of the largest coordinated series of enforcement actions by state and provincial securities regulators in the United States and Canada as well as one of the largest coordinated multi-national cryptocurrency and ICO sweeps.
NASAA was founded in the early 1900s to protect investors in Mexico, the USA and Canada. Today, it serves as a unifying voice and coordinating body for state-level securities regulators.
The mission involved NASAA members from more than 40 jurisdictions throughout North America, sweeping hundreds of ICOs and pulling out the questionable ones for further investigation. So far it's netted 70 inquiries and kicked off completed or pending investigations on 35 of them.
The actions announced in Operation Cryptosweep, and the potential violations found, are "just the tip of the iceberg" said NASAA president Joseph Borg. The task force found about 30,000 crypto-related domain name registrations, most of which cropped up in 2017 and 2018. There's clearly plenty more sweeping to be done.
"The persistently expanding exploitation of the crypto ecosystem by fraudsters is a significant threat to Main Street investors in the United States and Canada, and NASAA members are committed to combating this threat," said NASAA president Joseph Borg. "Despite a series of public warnings from securities regulators at all levels of government, cryptocriminals need to know that state and provincial securities regulators are taking swift and effective action to protect investors from their schemes and scams."
As well as investigating potentially illegal securities offerings and potentially fraudulent ICOs, the NASAA aims to raise public awareness of the risks around ICOs and cryptocurrency-related products.
The SEC has previously named consumer education as one of the most important elements of cryptocurrency enforcement going forward. The most extreme manifestation of this to date is probably the SEC's very own scam ICO, created for the purpose of educating consumers.
"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.
It's sound advice, and might be increasingly true as time goes on. As customers get increasingly careful with ICOs, fraudsters are upping their game and creating scams that look extremely real.
One of the most realistic such alleged scams to date might be the extremely careful and convincing Starscape Capital, which surprised buyers by disappearing with over 2,000 ETH (over US$1.4 million worth at current prices).
Other notable projects have highlighted the problem with trusting ICO review sites rather than doing the legwork oneself. The Benebit ICO, for example, managed to fool one ICO review site and was then simply rated trustworthy by others in a chain reaction. It later emerged that the scammers simply presented a fake passport which was just looked at, rather than checked in any way. It might not have fooled a bouncer, but it still managed to net Benebit over $3 million before the scam collapsed.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VEN, XLM, BTC and NANO.