ICOs have had a history filled with empty promises and shady actions and this has reached a tipping point for the North American Securities Administrators Association (NASAA). They are conducting a thorough investigation on ICOs to weed out any fraudulent actions. The NASAA, founded in 1919, is one of the oldest international investor protection organizations. They have conducted investigations within various areas of securities fraud and now are moving into the crypto space.
“Operation Cryptosweep” is investigating actions by 200 ICOs on the grounds of fraud. They hope to protect investors in the relatively new space that is often very opaque. NASAA president Joseph Borg announced the investigation, commenting
State and provincial securities regulators are committing significant regulatory resources to protect investors from financial harm involving fraudulent ICOs and cryptocurrency-related investment products and also are raising awareness among industry participants of their regulatory responsibilities.
One main point of the investigation will be to determine if any of the ICOs can be classified as securities. If any are ruled securities then there are various requirements that must be met before it can be bought and sold by investors. NASAA will also be looking for ICOs that look like the creators will be doing an exit scam. This has been a major issue for many ICOs in the past with companies raising money then running.
The unregulated nature of the field stands to pose several roadblocks for the NASAA. There are few to no filing requirements so getting information on the ICOS could be a long and tedious process. The crypto field is also constantly changing which requires the investigators to constantly stay updated with the current news.
Despite the challenges they may face, this is an investigation that was needed. Well over $100 million has been stolen through fraudulent ICOs. The issue has only gotten worse and these actions have hurt the ability for funds to be raised by legitimate offerings.