Texas Takes Lead In US-Canada Probe Of Crypto Investments
Texas, which started its own targeted investigation of cryptocurrency offerings last year, took the lead in organizing, managing, and coordinating the NASAA sweep…
The Texas State Securities Board, a leader in policing cryptocurrency-related investments, has joined more than 40 U.S. state and Canadian regulators in a coordinated investigation of fraudulent cryptocurrency-related investment products.
The North American Securities Administrators Association (NASAA) launched “Operation Cryptosweep” on May 1. Its members, which include all U.S. states and provincial securities agencies in Canada, have opened approximately 70 investigations and taken or have pending 35 enforcement actions.
Texas, which started its own targeted investigation of cryptocurrency offerings last year, took the lead in organizing, managing, and coordinating the NASAA sweep.
Texas Securities Commissioner Travis J. Iles has entered three enforcement orders since the start of the sweep, bringing to 10 the number of actions the State Securities Board has taken against illegal or fraudulent cryptocurrency promoters since Dec. 20, 2017.
The State Securities Board and NASAA member agencies in the coming weeks will continue to investigate cryptocurrency investment schemes — including the sometimes murky business of Initial Coin Offerings, in which firms sell their own “tokens” to raise capital — and pursue new enforcement actions.
Besides identifying hundreds of potentially fraudulent cryptocurrency schemes in the U.S. and Canada, the task force found other evidence of the frenzied interest in virtual currencies: There are approximately 30,000 crypto-related domain name registrations, most of which were created in 2017 and 2018.
“Although the task force’s work is far from complete, my suspicions have already been confirmed,” said Joseph Rotunda, Director of the Enforcement Division of the Texas Securities Board and the Vice-Chair of the Enforcement Section for NASAA. “The market for cryptocurrency investments is saturated with widespread fraud, and our work is only revealing the tip of the iceberg.”
In December 2017 the State Securities Board started a four-week investigation into cryptocurrency offerings that led to the NASAA sweep. The Texas investigation has led to 10 orders so far — the most by any state regulator — and ongoing investigations into more than 60 suspect offerings targeting Texas residents.
The State Securities Board enforcement division has uncovered voluminous evidence that clearly shows many promoters are attempting to capitalize on the hype and excitement associated with Bitcoin and other cryptocurrencies to defraud senior citizens, retirees and other Texas investors.
“Many promoters of cryptocurrency investment scams are using strikingly similar tactics,” Rotunda said. “Although they often promise improbably high returns, promoters rarely provide any material information on their investment strategies.”
Many of these issuers are also concealing the true identities of their principals, using phony addresses to depict their office locations, and covering up significant risks in investments tied to cryptocurrencies. Some promoters are even using the likenesses of celebrities and public figures to add a false sense legitimacy to their claims.
These tactics were employed by the companies the State Securities Board took action against in May during Operation Cryptosweep:
Wind Wide Coin AKA WWC Inc. offered triple-digit returns in a cryptocurrency trading program operated by a “trading bot” and used the likenesses of actress Jennifer Aniston and Prince Charles in testimonials touting the profitability of the scheme.
Bitcoin Trading & Cloud Mining Limited AKA BTCRUSH offered investments in a cloud-based cryptocurrency mining program using phony videos to falsely depict the interior, exterior and workings of its computer server farms.
Forex EA & Bitcoin Investment LLC attempted to capitalize on the intersection of the cryptocurrency and foreign exchange markets by promising fully guaranteed returns without disclosing its strategy and financial strength.
