U.S Watchdogs Will Have No Tolerance Against Crypto Fraudsters
Earlier this week, the Financial Industry Regulatory Authority (FINRA) and its ruling organization the Securities and Exchange Commission (SEC), opened investigations against some of the companies who made some false statements and scammed people.
You all heard about SEC if you are following the news but FINRA is not familiar for many people. We can say to you that FINRA is a private and non-federal agency but it’s overseen by the SEC. FINRA only has one specific job and that is to regulate U.S based brokerage firms who’s doing its business with the public.
On September 11, New York federal judge also ruled that the existing U.S securities law were applicable for dealing crypto fraud allegations and claims, the same day that SEC and FINRA opened investigations about fraudster companies.
Say Hello to FINRA, Because They Are Now in the Game
FINRA has filed a complaint against a resident called Timothy Tilton Ayre. Ayre was accused of the securities fraud and illegal distribution of a cryptocurrency called HempCoin (HMP).
Back in April 2016, Ayre claimed and advertised HMP as the first mineable coin backed by marketable securities as he went onto claim that, every 10 HempCoins will represent one share of his public company called Rocky Mountain Ayre.
Ayre’s coins were listed on exchanges like C-Cex and Yobit and more than 81 million HMP’s were mined and traded on these platforms. But now, HMP is not listed in any exchange and its market cap only standing around $104,663 according to a data from Coin Market Cap. It seems Ayre and his coin also deleted their social media accounts as well, so it’s safe to say this is a fraud at its finest.
FINRA stated Ayre’s claims were fraudulent and their press release the agency reminded that if they confirm there were violations or breaches, then Ayre might face a fine, censure or suspension.
SEC Starts to Battle With Hedge Funds As Well
SEC also filed a cease and desist orders against Crypto Asset Management Fund (CAM) and its owner Timothy Enneking. Enneking claimed CAM is the first regulated crypto asset fund in the U.S but in fact, the fund is not registered in any capacity. SEC states that the CAM broke the law and once the watchdog contacted the fund, they stopped their public offering and they also offered a buyback to investors. The fund also agreed to pay $200,000 fine, but they haven’t admitted or denied the claims as of yet.
SEC also sent a notice towards TokenLot, a broker-dealer lead by Lennky Kugel and Eli L. Lewitt. TokenLot claimed and marketed themselves as an ICO superstore but according to the regulator, Kugel and Lewitt haven’t registered their company in any capacity. Very similar to CAM, TokenLot also agreed to pay a fine to SEC which is currently around $470,000.
Existing Laws Can Apply to Crypto
U.S has also stepped in their efforts in terms of laws. A New York judge ruled that securities laws can be applicable for crypto fraud allegations and this is also the very first time that U.S court addressed the matter like this.
The case, however, was filed against Brooklyn resident called Maksin Zaslavskiy. Prosecutors have claimed Zaslavskiy took minimum of $300,000 from investors for his coin called RECoin, and he presented the product as its backed by a real estate and most notably, diamond. Investigators found that no real estate or diamonds supporting to Zaslavskiy’s digital assets.
So, as a result, U.S judge Raymond Dearie ruled that federal securities laws should be also applicable towards this kind of allegations.
Framework? Not Yet.
It’s safe to say, considering all these three separate cases, that U.S regulators have been working very hard to regulate the crypto market. FINRA has reportedly never issued any action within the crypto industry until now. But many predicted FINRA’s arrival to the market because they recently published a guide which is called how to avoid crypto scams.
Also, SEC hasn’t addressed the crypto hedge fund until now. After the latest bull run in 2017, hedge funds numbers have been rapidly growing as a recent report from Autonomous Next stated there are currently 223 cryptocurrency hedge funds. It’s now very easy to predict that SEC will be very careful and those funds need to up their game in order to comply with SEC’s regulations.
So far, U.S regulatory bodies have no exact scheme on how to regulate crypto industry but with that latest move, it’s safe to say U.S have upped their game against cryptocurrency fraudsters, who’s dominating the headlines for all the wrong reasons.