SEC Calls for International Cooperation to Curb Illegal ICO Crypto Token Sales
Initial coin offerings (ICOs) are the new IPOs. They have grown from a concept that many were skeptical of to a whole new market. Some ICOs are legitimate and successful, but many are turning out to be fraud. The SEC is taking notes, and it has now called for international cooperation between regulatory authorities in a bid to curb illegal ICOs.
A Spike In ICOs And Fraud
The volume of capital raised in ICOs has risen by a whopping 22,000% in just two years. The total amount raised through ICOs in 2016 amounted to almost $100 million – this is only a fraction of what some individual ICOs raise today, but it was still impressive at the time. This figure has risen to over $22 billion since then, representing a 22,000% growth.
The growing popularity of ICOs has also made them ideal vehicles for frauds and scammers. To this end, most ICO campaigns end up failing – even those that are held with honest intentions may end up failing. What’s more, some ICOs are outright frauds featuring all the hallmarks of scams.
Highly Lucrative, High-Risk Investments
The growing popularity of ICOs has given them a certain degree of credibility in spite of all the risks involved. The fact that millions of investors, including institutional investors, are willing to pour billions of dollars into these ICOs is a great confidence assurance for other investors. It also blinds them from the risks involved including the lack of regulation and uncertainty whether the underlying business will be successful.
Bringing Sanity To The Market
Steven Peikin, the co-director of the SEC’s security division, called for international cooperation in light of the rising cases of ICO-related fraud. The call was a part of his speech at the Harvard Law School’s Program on International Financial Systems.
Mr Peikin noted that the SEC could only do so much since most ICOs were sponsored by individuals outside the U.S. and its international jurisdictions. Unfortunately, the global nature of ICOs means that anyone, including U.S. citizens, can participate and invest. To this end, several U.S. citizens have already fallen victim to ICO scams.
For instance, many Americans bought into the PlexCoin ICO, in a big way. The ICO seemed legitimate in all aspects and the fact that it was based in Canada didn’t hurt. In the end, American investors lost over $15 million while international investors lost even more.
Operation Crypto Sweep – Setting The Pace
The U.S. and Canada have already begun cooperating on ICO raids in a bid to regulate the industry. Regulators from both companies formed a joint task-force for a crackdown dubbed “Operation Crypto Sweep”.
Operation Crypto Sweep has already launched over 70 investigations into fraudulent ICOs and issued cease-and-desist letters to some of the companies behind these ICOs through the North American Securities Administrators Association. Additionally, the SEC has warned celebrities promoting ICOs that they could be liable for legal consequences – some, including Floyd Mayweather, have already been fined.
The ongoing bear market is expected to choke out ICOs as investors stay away. Nevertheless, the SEC is not taking any chances as it has now called for international cooperation in a bid to stomp out fraudulent ICOs.