Some ICOs are outright frauds, SEC co-director says in a speech at Harvard

05 Dec, 2018 | Updated: 05 Dec, 2018
by Fifi Arisandi
Some ICOs are outright frauds, SEC co-director says in a speech at Harvard

The US Securities and Exchanges Commission (SEC) claimed that some of ICOs are "outright frauds" in a speech at the Harvard Law School. 

The Securities and Exchanges Commission (SEC)’s co-director for enforcement division, Steven Peikin made a speech at Harvard Law School’s Program on International Financial System just recently, where he spoke about ICOs.

He started by outlining the figures, on which he said that the ICO market “has exploded from a mere concept to a phenomenon” within a short time.

Back in 2016, ICOs managed to raise $100 million, which in 2018 the figure increased by 22,000% to over $22 billion.

According to him, the blockhain hype and the novelty of ICO as a way to raise funds have somehow attracted many investors, many of which decided to put their money without being aware of the risks of such asset classes.

While in fact, many ICOs often are lacking established records of the issuers, don’t have viable products, business models, and the capabilities to safeguard the digital assets from hackers. He even said that some of them can be simply “outright frauds”.

That said, the massive growth in the ICO market can obscure the fact that the ICOs are often high-risk investments.

Peikin recalled the case of ICO scam conducted by a Canadian, Dominic Lacroix who successfully defrauded many US investors a total of $15 million by promising a 13-fold profit in less than a month.

Lacroix turned out to have had a long history of doing similar financial scams in Quebec, Canada, as mentioned in the official speech document.

He also stated on his speech that the complication that emerges when dealing with ICO frauds usually comes from the fact that the raised funds are coming not only from US investors, but also from investors outside the country.

With Canada, the commission successfully performed more than 70 investigations to various crypto scams and fraudulent ICOs in more than 40 jurisdictions across the US and Canada in the Operation Crypto Sweep during May 2018.

That's why he mentioned that such international cooperation is key to combating fraudulent ICOs.

Aside from the sweeping, the SEC also released a warning to public figures, by stating that promoting ICOs may face federal laws since the sold coins might be securities.

Several renowned figures, such as Floyd Mayweather and DJ Khaled are reported to have settled with the SEC related to their lawsuits. 

However, there are people, like John McAfee, who chose to defy the commission by explicitly saying, "Come for me SEC."

Other people, like billionaire and crypto investors, Michael Novogratz thinks that with the SEC has begun taking actions towards fraudulent ICOs and crypto companies, more institutional investors will be finally convinced to invest in crypto as they see more certainties in the crypto space, which will result in growth and more adoption. 

Will the SEC see success in their battle against fraudulent ICOs? Stay here on Chepicap for more updates. 

Read more:

Novogratz believes 2019 a good year for crypto, despite losing $136M in 2018

McAfee gives advice on how to combat the SEC - "File a complaint with the FBI"

Will SEC crack down on social media influencers who promote crypto?

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