Recent Enforcement News
DENVER — The Colorado Division of Securities, part of the Department of Regulatory Agencies (DORA), today announced it has taken two enforcement actions as part of an international crackdown on fraudulent Initial Coin Offerings (ICOs) and cryptocurrency-related investment products. The sweep is being coordinated by the North American Securities Administrators Association (NASAA), of which the Division is a member.
As part of “Operation Cryptosweep,” the Colorado Securities Commissioner Gerald Rome, on May 3rd, signed orders for two companies found by the Division of Securities to potentially be in violation of Colorado Securities law by promoting Initial Coin Offerings to Colorado residents via their websites. The companies, which have no connection to each other, are Linda Healthcare Corporation out of Milpitas, California, and Broad Investments, LLC out of Sammamish, Washington.
“Fraudulent activity involving ICOs and cryptocurrency-related investment products is a significant threat to Main Street investors in Colorado,” Rome said. “Cryptocriminals need to know that the Division is committed to swiftly and effectively protecting investors from schemes and scams involving these products.”
The Colorado Division of Securities has joined with more than 40 other state and provincial securities regulators in the United States and Canada in “Operation Cryptosweep,” resulting in nearly 70 inquiries and investigations and 34 pending or completed enforcement actions since the beginning of the month. NASAA members are conducting additional investigations into potentially fraudulent conduct that may result in additional enforcement actions. These actions are in addition to more than a dozen enforcement actions previously undertaken by NASAA members regarding these types of products.
In April 2018, NASAA organized a task force of its member state and provincial securities regulators to begin a coordinated series of investigations into ICOs and cryptocurrency-related investment products. Regulators identified many cryptocurrency-related products and as part of its work, the task force identified hundreds of ICOs in the final stages of preparation before being launched to the public. These pending ICOs were advertised and listed on ICO aggregation sites to attract investor interest. Many have been examined and some were determined to warrant further investigation. A number of these investigations are ongoing and others resulted in enforcement actions announced today.
“The actions announced today are just the tip of the iceberg,” Rome said, noting that NASAA’s task force also found approximately 30,000 crypto-related domain name registrations, the vast majority of which appeared in 2017 and 2018.
A critical component of “Operation Cryptosweep” is raising public awareness of the risks associated with ICOs and cryptocurrency-related investment products. “Not every ICO or cryptocurrency-related investment is fraudulent, but we urge investors to approach any initial coin offering or cryptocurrency-related investment product with extreme caution,” Commissioner Rome said.
For more information about ICOs and cryptocurrencies, contact the Division at 303-894-2320. The Division also has issued two investor advisories: “What to Know About ICOs” and “Be Cautious of the Crypto Investment Craze.” These and more information can be found at www.dora.colorado.gov/dos.
The Department of Regulatory Agencies (DORA) is dedicated to preserving the integrity of the marketplace and is committed to promoting a fair and competitive business environment in Colorado. Consumer protection is our mission. Visit www.dora.colorado.gov for more information or call 303-894-7855/toll free 1-800-886-7675.
Division of Securities