Fraudulent ICOs in the United States are running out of places to hide.
They have already drawn the attention of the Securities and Exchange Commission (SEC), who recently set up its own fake token sale for the “HoweyCoin” in an attempt to publicise the dangers of investing in something without proper due diligence.
Further policing of the ICO space is now being undertaken by the North American Securities Administrators Association (NASAA), a membership body composed of hundreds of local regulators from the US, Canada and Mexico.
Last week the NASAA launched “Operation Cryptosweep”, the “largest coordinated cryptocurrency crackdown to date” which has created “nearly 70 inquiries and investigations and 35 pending or completed enforcement actions since the beginning of the month.”
As part of the operation, the Alabama Securities Commission (ASC) has ordered that three ICOs in the state “cease and desist” from their token sales.
According to the order against crypto mining firm Extrabit, the firm was conducting an illegal, and unregistered, securities offering.
The white-paper and website both promise a “185% RIO quarterly, to every investor that keeps a constant positive balance in their EXB Wallet.” These guaranteed returns are said to come from the mining of Bitcoin, Monero and ZCash, and Extrabit told their potential investors that “it is possible for the ROI to exceed the first 185% bonus since the value of EXB is proportional to cryptocurrencies like Bitcoin and Ethereum.”
Two other token sales, LEV and Platinum, have also been issued with cease-and-desist orders this month by the ASC, again for conducting sales of unregistered securities and from making unrealistic promises. According to Joseph Borg, who is head of both the ASC and the NASAA, “the persistently expanding exploitation of the crypto ecosystem by fraudsters is a significant threat to Main Street investors.”
Whilst “not every ICO or cryptocurrency-related investment is fraudulent,” he urged “investors to approach any initial coin offering or cryptocurrency-related investment product with extreme caution.”