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Crypto Crackdown

NASAA State and Provincial securities regulators see more crypto fraud

You can’t “see” it. You can’t “touch” it. You can’t “smell” it. But with the price of bitcoin and other cryptocurrencies back in favor and major tech companies circling the water hoping to enter the market, investors and con artists alike have returned to cryptocurrency-related investment products looking for quick profits.

NASSA sees an uptick in potential crypto fraud

According to the North American Securities Administrators Association (NASAA), state and provincial securities regulators are seeing an uptick this year in solicitations in potential crypto-related frauds. Through its ongoing Operation Cryptosweep initiative, NASAA says state and provincial securities regulators have opened 130 new investigations into questionable cryptocurrency-related investment offerings and have 35 pending or completed enforcement actions since the beginning of 2019.

Organized in 2018, NASAA’s member state and provincial securities regulators began a coordinated series of investigations into initial coin offerings (ICOs) and other cryptocurrency-related investment products. Since then, this coordinated regulatory focus has resulted in 85 pending or completed enforcement actions involving ICOs or cryptocurrency-related investment products and approximately 330 inquiries or investigations by securities regulators from U.S. states and Canadian provinces.

According to Michael Pieciak, NASAA President and Vermont Commissioner of Financial Regulation, “Recent headlines of potentially new cryptocurrency products, the near tripling in value of some cryptocurrencies, and the sharp increase in market capitalization for all cryptocurrencies is again creating an environment that attracts white-collar criminals, bad actors, and other promoters of illegal and fraudulent securities schemes.” With that in mind, he cautions investors to be mindful of the “hype.”

What are crypto risks?

The Association notes that:

  • Cryptocurrency markets are highly volatile, which makes them unsuitable for most investors looking to meet long-term savings or retirement goals.
  • There is little regulatory oversight of cryptocurrency and many crypto-related investments at this time. This means, there may be no recourse should the cryptocurrency disappear due to fraud or a cybersecurity breach.
  • Investors in cryptocurrency or crypto-related investments will have no recourse should they fall victim to fraudsters. These currencies exist only on the internet. Issuers may be located anywhere in the world. Locating and clawing back funds through courts may be impossible.

What if an investment sounds too good to be true?

Then it probably is. Caveat emptor. While not every crypto-apple is a bad crypto apple, Pieciak points it can be hard to tell the difference and so it is important for individuals and firms selling these products to understand that state and provincial laws or regulations may apply to these sales, especially securities laws.

“As with any investment opportunity, be cautious when dealing with promoters who claim their offering does not have to be registered with securities regulators. Investigate independently before you invest and contact your state or provincial securities regulator with any concerns before parting with your hard-earned money.”

Can Patrina help advisor selling cryptocurrencies stay compliant?

Yes. For more than 25 years, Patrina has helped investment advisors, broker-dealers, and compliance professionals like you stay on the “straight and narrow” efficiently and cost-effectively. So, let’s talk. Email me at or call me at 212-233-1155 to ask about Patrina’s cost-effective, designated third-party services, our comprehensive 8-module compliance solution, and compliant data capture & file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered.Let’s talk.