On January 4th, the same day I posted about a recent FINRA Investor Alert regarding cryptocurrency, there was a new press release from the North American Securities Administrators Association (NASAA) with further guidance on the same topic. NASAA’s analysis and warning amounts to this: Initial Coin Offerings (“ICOs”), and all other investment products related to cryptocurrency or the blockchain, pose a threat to investors.
“A NASAA survey of state and provincial securities regulators shows 94 percent believe there is a ‘high risk of fraud’ involving cryptocurrencies. Regulators also were unanimous in their view that more regulation is needed for cryptocurrency to provide greater investor protection.”
The same day, the SEC made a public statement from Chairman Jay Clayton and Commissioners Kara M. Stein and Michael S. Piwowar, in wholehearted agreement with NASAA: “The NASAA release also reminds investors that when they are offered and sold securities they are entitled to the benefits of state and federal securities laws, and that sellers and other market participants must follow these laws. Unfortunately, it is clear that many promoters of ICOs and others participating in the cryptocurrency – related investment markets are not following these laws. The SEC and state securities regulators are pursuing violations, but we again caution you that, if you lose money, there is a substantial risk that our efforts will not result in a recovery of your investment.”