The U.S. SEC is preparing for a massive hunting down of fraudsters of cryptocurrency
foxbusiness.com the U.S. Securities and Exchange Commission are taking aggressive measures to stop the fraudulent avalanche in the cryptocurrency business. The behaviour of the regulator can lead to lawsuits from several dozen companies and individuals who deal with sales and advertising in this poorly regulated industry.
Mostly, the SEC measures focus on ICO, with the help of which start-up companies attract capital by selling their digital coins for other cryptocurrencies, including Bitcoin. The first issue of coins is considered as a relatively inexpensive way to attract investment because there is no need for spending money on regulatory requirements and stock exchange registration.
But this lack of transparency also attracted the attention of the commission, whose manager Jay Clayton harshly spoke about the misuse of cryptocurrencies in business. Ever since Clayton took office, in the digital currency sector, the Commission staff has managed to resolve nine cases of fraud. However, as informed sources report, there are still a dozen more similar cases at the investigation stage, where decisions, due to the high workload of the regulator, will be announced later this year.
The people who know Jay Clayton well point out that he compares the cryptocurrency clamour with other manias due to which many investors have lost their savings. It relates to the financial bubble of 17th century Netherlands, commonly known as “tulip bulb”, as well as to the "dot.com" bubble in the second half of the 1990s – the beginning of 2000.
"I would say that the last day will come soon here, too. The countries understand that measures must be taken in this sector to stop fraud and this is a cause for concern,"
- said Harvey Pitt, the founder of the consulting company Kalorama Partners and the former SEC manager.
Cryptocurrencies is a very dangerous bubble for private investors.
The regulator's emphasis on ICO and the potential threat to private investors shows that the commission sees the threat to less experienced investors in these methods of raising funds. The ICO regulator does not monitor, “there are no standard procedures, thus attracting fraudsters who by selling worthless products generate money from clean air – as in the 1990s, it was done by the companies of different commodity distributors, calling at random.
Despite the lack of regulation, the SEC compares cryptocurrency with securities, so it has some ways to influence offenders. ICO is currently enjoying great popularity. Last year, in this way, the start-up companies have sold their digital currencies for a total value of about $ 6 billion, and this year, this success may be a recurring event, despite the reduction of cryptocurrency clamour, the value of which has fallen dramatically this year.
The SEC is most worried about the fact that the digital currency rate increase to the maximum extent contributed to the speculations of the small investors who are influenced by the popularity of cryptocurrency when it in the mid-December of the last year reached its record heights close to 20 thousand dollar mark. Today Bitcoin sells just over 8 thousand dollars.
The SEC protects the interests of private investors.
Jay Clayton, who was appointed by Trump as the head of the SEC last January, was repeatedly criticized for being too mild. His opponents claim that Clayton keeps to the Republican strategy and weakens the pressure on the Wall Street business. But those who know Jay Clayton argue that in fact he turns his attention to the problems which greatly affect the situation of the small investors by pushing into the background such violations as the trade of insiders or the sale non-public information within professional traders' circles.
By such means, the SEC will tackle the schemes due to which small investors can become the victims of fraud. Jay Clayton considers that due to the widespread clamour wave of cryptocurrency ecosystem, small investors are vulnerable because of potential illegality.
"It is clear that there is also a real business in the digital currency industry. But Jay Clayton claims that the majority of its representatives are fraudsters"
- stated the representative of the commission.
In the background of the SEC's concerns regarding the illegality in this sphere, the government was planning (possibly for an indefinite period of time) to issue Bitcoin ETF securities which would correspond to the price of Bitcoin in dollars or the price of future contracts linked to cryptocurrency. The twins Cameron and Tyler Winklevoss who have become famous for the lawsuit against Mark Zuckerberg, the founder of Facebook, have submitted a repeated application to the commission for launching ETF after the regulator had rejected the brothers' first application last year. According to informed sources, Cameron and Tyler Winklevoss are in no way able to persuade the SEC to give them permission to open the fund, as Clayton is worried about the risk of fraud.