SEC Report Highlights Enforcement Actions Against ICO Scams

SEC Report Highlights Enforcement Actions Against ICO Scams

The 2018 fiscal-year report by the U.S. Securities and Exchange Commission’s Division of Enforcement highlighted recent efforts taken by the agency to combat fraudulent activities associated with token sales. SEC officials concluded protecting investors from risks must not come at the cost of inhibiting the nascent innovative space.

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SEC Shutters ICOs in 2018

According to the report, addressing misconduct related to Initial Coin Offerings has become the Division of Enforcement’s top priority. The body argued the hype surrounding the fledgling and unregulated cryptoeconomy has concealed serious investment risks involved in the sector.

The Division’s Cyber Unit, formed last year, played a crucial role in zeroing in on ICO-related frauds over the past several months.

“Given the explosion of ICOs over the last year, we have tried to pursue cases that deliver broad messages and have a market impact beyond their own four corners,” stated the report.

The 45-page document outlined all the actions taken by the SEC division throughout 2018 to protect investors and combat fraudulent activities in the cryptoverse.

In 2018, the SEC went after ICOs that the commission thought would send a message.

Specifically, the agency took enforcement actions against more than a dozen token sales this year. Of those, three entailed ICOs that had collectively duped investors out of $68 million USD before the SEC stepped in .

To further safeguard investors, the Division of Enforcement formed the Retail Strategy Task Force (RSTF).

The RSTF thereafter initiated a “lead-generation and referral initiative involving trading suspensions related to companies that purport to be in the cryptocurrency and distributed ledger technology space.”

Taking a Balanced Approach

The Division of Enforcement’s actions have not been limited to ICOs in 2018. The body has also looked into startups, unregistered broker-dealers, and other crypto-related scams.

Zooming out, the wider SEC launched its fake Howey Coin back in May to educate investors on the methods fraudsters use to manipulate people in the space.

In that vein, the 2018 fiscal-year report noted the commission intended to take a constructive approach to the growing cryptocurrency sector, emphasizing at one point that enforcement actions must not inhibit innovation.

“The Enforcement Division recognizes the need to balance its mission to protect investors from the risk posed by fraud and registration violations against the risk of stifling innovation and legitimate capital formation,” the report noted.

Accordingly, the SEC has maintained its approach towards the sector has been “thoughtful and consistent.”

What’s your take on the SEC’s new report? Share your views in the comments section below.


Images via Pixabay

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