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International cooperation is essential to eradicate ICO fraud, said Steven Peikin, co-director of the enforcement division of the Securities and Exchange Commission.
Peikin made observations during a December 3 speech at the Harvard Law School program on international financial systems, where he discussed the amazing growth of the ICO market.
"The ICO sponsors are, in many cases, located outside the United States," said Peikin. "And international cooperation is fundamental to our ability to investigate and, where appropriate, to recommend to the Commission to take action against it".
ICOs have increased 22,000% since 2016
Peikin noted that the ICO market "exploded from a simple concept to a phenomenon" in a few years.
In 2016, ICOs raised less than $ 100 million. In 2018, this figure soared to over $ 22 billion – a peak of 22,000%. With that rapid growth, a massive increase in fraudulent activity has arrived.
Complicating things for regulators is that the money raised in initial coin offerings often comes from investors both inside and outside the United States.
Peikin noted that the novelty of the ICOs – coupled with the excitement surrounding the blockchain technology – makes them an attractive vehicle for investors. Exuberance can sometimes make them blind to the risks associated with this nascent asset class, he warned.
Peikin: "Some Ico are obvious frauds"
"Growth in the ICO market can obscure the fact that these offers are often high-risk investments," said Peikin. "Issuers may not have an established track record, they may not have good products, business models, or the ability to protect digital currencies from hacker theft, and some of the offers may simply be frauds."
Steven Peikin then hinted at the founder of PlexCoin founder Dominic Lacroix, a Canadian citizen who plucked up to $ 15 million from thousands of US investors for his sham ICO promising a profit of 13 times in less than a month.
The SEC has learned from the Canadian authorities that Lacroix had a long history of handling similar financial scams in Quebec.
In May 2018, US and Canadian regulators launched over 70 investigations into cryptocurrency frauds and fraudulent coin deals as part of a large crackdown called Operation Crypto Sweep.
As reported by CCN, the North American Securities Administrators Association sent letters of cessation and waiver to operators of sham companies in more than 40 jurisdictions in the United States and Canada.
Operation Crypto Sweep aims at scams
The Crypto Sweep operation came shortly after discovering that fraud was very alarming among the promoters of the encrypted investments.
Securities attorneys have also warned celebrities who support ICOs who could be sued for aiding and abetting fraud if they promote false cryptographic products.
Last week, that warning turned into a rude awakening for boxing champ Floyd Mayweather and music producer DJ Khaled, when they were fined $ 767,500 by the SEC for illegally promoting ICO.
TKO: Floyd Mayweather, DJ Khaled beaten by SEC Probe in ICO Promos https://t.co/eg3HQmexMU
– CCN (@CryptoCoinsNews) November 29, 2018
These regulatory repressions – combined with the current bear market – have led some industry experts to declare that the ICO market is dead.
"The ICO market is dead," said Barry Silbert, founder of the Crypto Investment Fund Digital Currency Group. "Now you have a lack of request from ICO, and you have all the ICO sponsors who raised a lot of bitcoins [and ether] that are now starting to sell it. "
Although he believes that the ICO mania is over, Silbert remains optimistic about the future of the cryptocurrency industry, and has defined the current market crisis as an "embarrassing transition" that will pass.
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