- In a speech at Harvard Law School’s Program on International Financial Systems, co-director of the Securities and Exchange Commission’s enforcement division Steven Peikin discussed the phenomenal growth of the ICO market.
- In the same speech he also stressed the importance of international cooperation for the SEC’s ability to investigate, and where appropriate, bring enforcement action.
- In May of 2018, US and Canadian regulators launched a massive investigation into fraudulent initial coin offerings and cryptocurrency scams as part of an extensive crackdown called “Operation Crypto Sweep.”
Steven Peikin, co-director of the Securities and Exchange Commission’s enforcement division emphasised the importance of international cooperation in eradicating ICO fraud at a speech he gave at Harvard Law School’s Program on International Financial Systems.
The Extraordinary Rise of ICOs
According to Peikin, the ICO market “exploded from a mere concept to a phenomenon” in just a few years.
From raising less than $100 million in 2016, the figure had a staggering 22, 000% rise and skyrocketed to $22 billion. Unfortunately, with the massive growth also came a vast increase in fraudulent activities.
Making matters even more complicated for regulators is the fact that money raised in initial coin offerings often come from investors both from in and outside the United States.
However, while the novelty of ICOs alongside the buzz surrounding blockchain technology makes it an enticing vehicle for investors, it also blinded many to the risks involved.
The current growth and popularity of ICO often makes investors overlook the fact that ICOs are often high-risk investments. In Peikin’s words:
“The issuers may lack established track records. They may not have viable products, business models, or the capacity for safeguarding digital currencies from theft by hackers. And some of the offerings can be simply outright frauds.”
In May of 2018, both US and Canadian regulators launched more than 70 investigations related to fraudulent initial coin offerings and cryptocurrency scams as part of a widespread crackdown called “Operation Crypto Sweep.”
Operation Crypto Sweep
After noticing an alarming and widespread fraud among crypto investment promoters, Operation Crypto Sweep was formed.
Celebrities who endorse ICOs have also been warned they can be sued for abetting and aiding fraud if they end up promoting sham crypto products. This warning became a rude awakening for music producer DJ Khaled and boxing champ Floyd Mayweather. Both were fined a combined $767, 500 for promoting ICOs illegally.
The current bear market and the regulatory crackdowns had industry insiders declaring the ICO market to be dead. According to Digital Currency Group founder, Barry Silbert:
“The ICO market is dead — over. You now have the lack of demand from ICOs. And you have all the sponsors of the ICOs who raised a bunch of bitcoin [and ether] that are now starting to sell that.”
However, while he maintains the ICO mania is over, he still remains bullish about cryptocurrency’s future and maintained the recent market downturn is nothing more than an “awkward transition” that will eventually pass.