Some ICOs are “Outright Frauds”, Claims SEC’s Official


“We see ICOs that appear to be simply outright frauds,” said Steven Peikin, co-director of the Securities and Exchange Commission’s (SEC) enforcement division.

He was speaking at Harvard Law School’s Program on International Financial Systems. Much of the discussion focused on the astonishing growth of the ICO market.

Peikin touched upon many different issues, starting from the growth of the ICO market to international cooperation required to track illegal offerings.

As mentioned by Peikin in his speech, there has been a lot of public attention on SEC’s recent activities in the areas of cryptocurrency and ICOs. Token offerings raised less than $100 million in 2016, compared to $22 billion so far this year alone– an increase of astonishing 22,000 percent.

Speaking further about the growth in the ICO market, Peikin added that some offerings have no,

“Viable products, business models, or the capacity for safeguarding digital currencies from theft by hackers. And some of the offerings can be simply outright frauds.”

Two general violations of the securities law have been noted by SEC recently: first, token offerings that can be described as “security”, but in practice, these are being sold, brokered, or traded without complying with all necessary requirements of the federal securities laws. And secondly, token sales where the issuers are using excitement around the cryptocurrency ecosystem to simply rip off money from investors. The latter is described as “outright frauds”.

Thus, international cooperation is critical since many of the fraudsters are located outside the United States, according to Peikin. He then cited the case of Dominic Lacroix, where the cooperation between regulators from  Canada and the US resulted in a freeze of assets of Lacroix and Sabrina Paradis-Royer, his wife. The pair was responsible for a fundraising scheme designed to steal $15 million from investors.