On May 21, 2018, the North American Securities Administrators Association (NASAA) announced the launch of a series of inquiries and investigations by state and provincial securities officials in the United States and Canada to crack down on fraudulent initial coin offerings (ICOs), cryptocurrency-related investment products, and those behind them.

Dubbed "Operation Cryptosweep," the effort has brought nearly 70 inquiries and investigations, including 35 pending or completed enforcement actions, between May 1 and May 21, 2018. NASAA members from more than 40 jurisdictions coordinated the effort, which began with the formation of a NASAA-led task force in April 2018. NASAA will provide an update in late June 2018 for ongoing investigations.

The states and provinces that have brought enforcement actions in the sweep include the following:

Also on May 21, 2018, the Financial Industry Regulatory Authority (FINRA) held its annual conference in Washington, DC, and FINRA CEO Robert Cook said FINRA may issue a Regulatory Notice to provide guidance for broker-dealers and highlight areas of importance relating to digital assets.

NASAA said the sweep was one of the largest such coordinated efforts by US and Canadian state and provincial securities regulators, and a critical component of the sweep was to raise public awareness of the risks associated with ICOs and cryptocurrencies. NASAA President Joseph Borg said the announced actions were "just the tip of the iceberg," noting that the task force found approximately 30,000 crypto-related domain name registrations, most of which appeared in 2017 and 2018.

On May 22, 2018, Securities and Exchange Commission (SEC) Chairman Jay Clayton issued a statement on NASAA's announcement, applauding the state and provincial regulators for their efforts, and stating that this should be a strong warning to would-be fraudsters in this space.

For more information on the SEC's recent statements on cryptocurrencies and ICOs, see Legal Updates: