State regulators launch 'Operation Cryptosweep' to crack down on fraud

NASAA announces series of investigations, enforcement actions in U.S. and Canada targeting shady initial coin offerings and cryptocurrency products

May 21, 2018 @ 2:29 pm

By InvestmentNews

In a coordinated effort among its member regulators, the North American Securities Administrators Association has launched a series of enforcement actions by state and provincial securities officials in the United States and Canada to crack down on fraudulent initial coin offerings (ICOs), cryptocurrency-related investment products and those behind them.

Dubbed "Operation Cryptosweep," the effort by NASAA members from more than 40 jurisdictions has resulted in nearly 70 inquiries and investigations and 35 pending or completed enforcement actions related to ICOs or cryptocurrencies since the beginning of May. The coordinated effort began in April.

(More: Matt Hougan on exploring frontiers of cryptocurrency)

NASAA said its members are conducting additional investigations into potentially fraudulent conduct that may result in more enforcement actions. These actions are on top of more than a dozen enforcement actions previously undertaken by NASAA members regarding these types of products.

NASAA said a critical component of its effort is raising public awareness of the risks associated with ICOs and cryptocurrencies.

"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," said Joseph P. Borg, NASAA president and director of the Alabama Securities Commission.

(More: Why cryptocurrency could be your worst tax nightmare)

Among the state and provinces that have brought enforcement actions in the effort are Alabama, British Columbia, Colorado, Massachusetts, Missouri, New Jersey, New York, North Carolina, Nova Scotia, Quebec and Texas.

In a statement, Massachusetts Secretary of the Commonwealth William Galvin's Securities Division said it had settled with Blue Vase Holdings, which agreed to cease and desist selling unregistered securities, pay a fine and be censured, and offer rescission to investors.


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