The cryptocurrency market is rife with fraudsters, Ontario Securities Commission says

Ontario Securities Commission CEO Maureen Jensen says fraud artists are taking advantage of the newness of the cryptocurrency space and she warns that some Canadian investors are getting scammed.

Caveat emptor very well could be the motto of the cryptocurrency space, a sector that continues to struggle with legitimacy issues even as Canadian securities regulators struggle to provide clarity on digital currencies and the ICOs or initial coin offerings often employed to raise capital in the sector.

“This is the new shiny thing to invest in, and people are getting hurt,” Jensen said in conversation with BNN Bloomberg recently. “There are cryptocurrency firms that are completely legitimate, that are playing by the rules and are raising capital to build blockchain environments and new systems that could potentially be the unicorns of the future.”

“But there are many, many people who are fraud artists that are coalescing around these new shiny objects, and they are trying to raise capital from individual investors and then they abscond — they’re not ICOs, they’re out and out frauds,” she says.

Earlier this month Canada’s national body of regulators, the Canadian Securities Administrators, attempted to clarify the nature of the ICO so as to determine when a digital token should be classified as a security. The CSA stated that in large part tokens do, in fact, display the characteristics of a security, even in many cases where its purveyors have emphasized the token’s use-value (depicted as utility tokens).

“In many of these cases, the offering will involve securities despite the fact that the tokens have one or more utility functions,” the CSA states.

More broadly, the North American Secuirities Administrators Association (NASAA) has been pursuing what it calls “Operation Crypto-Sweep,” carrying out over 70 investigations so far into potentially fraudulent or exploitative practices in the space. Last month, BC’s Securities Commission reportedly sent letters to 12 offshore companies advertising ICOs in BC, ordering them to cease activities until the BCSC finds them compliant with securities laws.

“It’s never possible [to get rid of every fraudster] because they keep morphing and changing,” says Jensen. “And this is a global business. So, we’re working really hard at [the International Organization of Securities Commissions] with all of our foreign counterparts to try and understand where these people are because they just keep popping up in different jurisdictions, and they move from binary options one month to cryptocurrencies the next.”

“So, it’s really important that people understand what they’re investing in. Please don’t put your money down unless you check out who’s behind it,” she says.

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