New Jersey Securities Regulator Freezes Two Fraudulent ICOs
Despite the slowed trend of actual ICOs in the crypto sector, bad actors are still using the label to target mainstream investors with outlandish promises of crypto-related gains.
Promises dressed up as token sales, or ICOs, are still making the rounds, at least until the New Jersey securities watchdog interferes. Two fraudulent crypto-investment schemes were given a cease-and-desist order, breaking the fundraising that was targeted at retail investors.
The so-called Zoptax and Unocall ICOs attempted to raise funds through an online offering, triggering legislation against offering unregistered securities. Zoptax Coin was deemed to be a security not exempt from registration in the state of New Jersey. The Unocall project also sold an unregistered security, based on the promise for a dividend-like payout through staking.
“Today’s action demonstrates that our Bureau of Securities stands ready to enforce our investor protection laws in cases involving initial coin offerings and cryptocurrency-related investment schemes,” said Attorney General Gurbir S. Grewal. “As innovation in the online cryptocurrency-related investment market continues, market players need to understand that the rules still apply to them.”
The New Jersey regulator has also interfered in multiple previous cryptocurrency offers, especially those that used direct and aggressive persuasion techniques. New Jersey’s Attorney General launched a specialized task force in April 2018, targeting ICOs and token sales, to protect small-scale investors.
The drive to investigate crypto-related projects turned into Operation Cryptosweep, launched in January 2019. During the later stage, the task force opened 85 enforcement actions on ICOs and crypto-investment projects. More than 330 inquiries or investigations have been taken up against US and Canada-based projects.
The latest crackdown arrives at a time when the ICO sector has slowed down significantly, displaced by IEOs, or exchange-based token sales. But there are still enough rogue token projects to misguide small-scale investors.
“With the price of Bitcoin increasing over the last few months and the announcement of Facebook’s Libra, there has been a sharp increase in public solicitations to invest in crypto-related products that appear on their face to be suspect,” said Bureau Chief Christopher W. Gerold.
While the crypto community remains more skeptical of new tokens, especially after the prolonged bear market for altcoins, the ascent of BTC prices may indeed drive more newcomers to shady digital assets.