By
Temitope Olatunji
April 18th, 2024
The ICO market has exploded in the last two years attracting an ever-rising number of fraudsters. A SEC official now believes that international cooperation is crucial to bring the scammers to justice.
The crypto-world has gained popularity in recent years. The new investment opportunities also feature many scammers trying to fleece innocent investors off their money. One sector of the new crypto world that has achieved extensive growth is the initial coins offering (ICO) arena. In the past two years, there were reports of many suspected ICO fraud cases.
2018 is a noteworthy year for the United States Securities and Exchange Commission (SEC)’s attempts to enforce regulations against cryptocurrency companies. According to one director, alliance with other international regulatory agencies played a fundamental role in enhancing the SEC’s regulatory actions recently.
A co-director of the Division of Enforcement at the Commission, Steven Peikin, acknowledged international cooperation as a vital in fighting unregistered and fraudulent individuals. Peikin made these remarks on December 3, 2018, at the Harvard Law School’s Program on International Financial Systems (PIFS). He was speaking to the Regulators of Securities Markets.
Peikin is the leader of a team of attorneys and accountants who actively investigate and prosecute all types of civil violations of the U.S. federal securities laws.
ICOs Have Exploded Since 2016
He started by stating that the ICO market has spiked from a mere concept to a phenomenon investment channel. In 2016, ICOs acquired $100 million while in 2018 the figure shot up to at least $22 billion. That represents a 22,000% increase.
According to Peikin, the blockchain popularity and the novelty of ICO as a fundraising method has attracted many investors. Most of these investors do not know the risks involved in the new asset classes. It is notable that many ICOs do not have any viable products, established records of the issuers, business models, and dependable capacity to keep hackers away.
The Frauds
Peikin believes that some of them are absolute frauds. He also added:
“The growth in the ICO market can obscure the fact that these offerings are often high-risk investments.”
The co-director highlighted on the Dominic Lacroix ICO scam. That scam swindled many US investors around $13 million by issuing a 13-fold fake profit promise in less than a month.
Lacroix, a Canadian, was proven to have had financial scams’ history reported in Quebec, Canada, according to the official speech document. Regulators face challenges since the money acquired in ICOs often comes from investors across the world.
In May 2018, Canadian and U.S. regulators launched at least 70 investigations into falsified ICOs and cryptocurrency scams. They called the widespread crackdown ‘Operation Crypto Sweep’. Also, the North American Securities Administrators Association sent warning letters to sham crypto companies’ operators. Most operators work from over 40 jurisdictions in U.S. and Canada.
The crackdown was launched shortly after regulators discovered many ICO fraud cases among several crypto investment promoters. Securities attorneys also sent stern warnings to celebrities who endorse ICOs informing them that they can get sued for abetting fraud if the ICO products are a sham.
Peikin concluded by saying that the Agency would continue cooperating with global partners to catch and prosecute any ICO fraudsters. Other world leaders speaking at the recent G20 Summit in Buenos Aires share his sentiments.