Securities and Exchange Commission (SECO Chairman Jay Clayton has issued a comment on Operation Cryptosweep – a coordinated enforcement action launched by state and provincial regulators attacking fraudulent initial coin offerings. Clayton said the North American Securities Administrators Association members (NASAA) play an important role in “protecting Main Street investors.”
Clayton remained consistent that existing securities laws still apply whether the offer is called an ICO or an IPO.
” At their core, these laws require full and fair disclosures of material information about both the securities and the venture being funded. Unfortunately, some market participants seem to believe that the use of new technology provides a basis for ignoring the core principles of our securities laws. In the United States, we have built a $19 trillion dollar economy by facilitating investments in our public and private capital markets through our disclosure-based approach to regulation. Certainly there are improvements that can be made to our regulatory system. There always are and we are pursuing various initiatives to increase efficiency and enhance investor protection. But there is absolutely no case for abandoning our core principles. I know NASAA shares this view. “
Clayton added that the actions being announced should be a “strong warning to would be fraudsters.” He stated that many sets of eyes are watching at an international level. Clayton referenced the ICO spoof site HoweyCoins.com that was created by SEC staff stating;
“The offering is not real. It is a fake. But it does illustrate the common “red flags” of fraud in the ICO markets and how little work it takes to engage in such a fraud. I encourage investors to visit and view the materials here to help you tell a real investment opportunity from a scam. Also, I previously suggested a list of sample questions for investors considering a cryptocurrency or ICO investment opportunity here. Investors should demand answers to these and other questions about potential investments. Investors should also remember that although the SEC and other federal, state, and provincial regulators are committed to protecting investors in these markets, there is a real risk that enforcement efforts may not make investors whole who have lost their investments to fraud.”