The North American Securities Administrators Association (NASAA), announced today, August 28, that the regulatory organization is actively investigating more than 200 initial coin offerings (ICOs) and cryptocurrency investment vehicles as part of the previously revealed Operation Cryptosweep initiative.

Operation Cryptosweep Takes Aim at Unregulated Crypto Investments

Back in May 2018, the 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”. The new task force immediately began investigating, at scale, a wide range of cryptocurrency-related investment products and ICOs. Today, the NASAA published a new press release providing an update, recommitting its efforts in cracking down against crypto-related fraud.

In the update, the NASAA revealed that since Operation Cryptosweep launched in May, the coordinated effort has resulted in a grand total of 46 “enforcement actions involving ICOs or cryptocurrency-related investment products.”

NASAA President and Alabama Securities Commission Director Joseph P. Borg said that in addition to “committing significant regulatory resources to protect investors from financial harm involving fraudulent ICOs and cryptocurrency-related investment products,” the NASAA is also working to raise awareness of the “regulatory responsibilities” industry participants bear.

Regulators aren’t just uncovering cases of fraud. They’re also finding “many potential violations of state and provincial securities laws,” mostly pertaining to a lack of properly registering products as securities before issuing the product to investors – as is the case with many ICOs.

“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.”

The NASAA took the opportunity to remind market participants to register with their respective regulatory agencies, and to remind investors to do their due diligence before investing in any product, registered or otherwise. Borg even suggests that just because an offering is registered, it can still be fraudulent so investors must do their “homework and contact your state or provincial securities regulator with any concerns before parting with your hard-earned money.”

How Can Investors Protect Themselves?

A recent study conducted by research firm Satis Group found that as much as 80% of all ICOs were identified as scam, proving that Operation Cryptosweep is necessary to enforce compliance across the booming ICO industry. So how can initial coin offering investors stay safe?

The United States Securities and Exchange Commission says to watch out for “red flags” commonly found in ICO investment schemes. These include endorsements from celebrities, the promise of guaranteed returns, a lack of regulatory compliance, optional credit card payments, and more.


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