SEC Report: Reducing Cryptocurrency Scams Among Their Top Priorities

In the U.S. Securities and Exchange Commission’s (SEC) latest annual report, the regulatory authority explained that reducing the number of cryptocurrency-related scams is currently among their top priorities. The report specifically cites initial coin offerings (ICOs) as one such sector of the industry that they are focusing on.

The report comes amidst an exponential increase in crypto-related scams that has resulted from increased public interest and the complex nature of the industry that leads many neophyte investors to fall prey to savvy scams.

Cryptocurrency, DLT, and ICO Markets Their Primary Focuses

In a section of the report titled “Focus on the Main Street Investor,” the agency explains that their main goal is to protect traditional retail investors from falling prey to complex scams that specifically target their lack of technological knowledge.

Naturally, the cryptocurrency industry is one such industry that has a problem with scams due to its unregulated nature, and the SEC states that they are launching multiple initiatives with partner agencies to reduce fraud in the crypto and DLT sectors.

“Additionally, in partnership with the Division’s Cyber Unit and Microcap Fraud Task Force, as well as the Division of Corporation Finance’s Digital Asset Working Group, the RSTF has launched a lead-generation and referral initiative involving trading suspensions related to companies that purport to be in the cryptocurrency and distributed ledger technology space.”

With regards to ICO-related regulation, they explain that in 2018 alone they have already brought 20 stand-alone cases against ICO companies that have been accused of legal misconduct and/or misleading investors.

“Since the formation of the Cyber Unit at the end of FY 2017, the Division’s focus on cyber-related misconduct has steadily increased. In FY 2018, the Commission brought 20 stand alone cases, including those cases involving ICOs and digital assets. At the end of the fiscal year, the Division had more than 225 cyber-related investigations ongoing.”

As for their strategy to reduce fraud and misconduct in the nascent markets, they say that they have focused on increasing the public’s alertness to the amount of fraud, prosecuting cases to the full extent of the law, requiring that issuers have the proper broker-dealer licensing to offer tokens, and by holding platforms accountable for the quality of the tokens being offered.

Despite the SEC being keen on reducing fraud, they have yet to lay out a formal regulatory framework that focuses specifically on cryptocurrencies and ICOs, rather than using existing laws that are geared towards traditional investments.

Thailand’s main regulatory agency (also called the SEC) is one example of an agency that is regulating the markets through the use of specific frameworks that are designed to help the markets progress while still reducing fraud and misconduct.

The Thai SEC states that, with regard to ICOs, funding must be done through approved venues and that token issuers must receive licensing from the government:

“ICO fundraising needs to be done through an ICO portal approved by the SEC. The ICO acceptance criteria may include due diligence and screening of funders from dishonest people. The source code of the smart contract will automatically be enforced against the contract. After the sale, the SEC publishes a copy of the statement on the SEC website.”

There are currently no signs as to whether or not the U.S. SEC will eventually release a similar framework that is designed specifically with cryptocurrencies and token offerings in mind, but until then it is likely that accusations of fraud and misconduct will continue growing.

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Report: More Than Three-Quarters of ICOs Were Scams

About half of the existing crypto-asset market today – numbering some 1,500 – functions on top of an existing blockchain like ethereum, according to a new report.

The study from Satis Group, which forms part of a five-entry series analyzing the state of the cryptocurrency ecosystem, explores the state of what it calls “platform networks,” honing on ethereum as well as other blockchains like NEO, EOS and Cardano, among others.

In looking at the “market share” of those platforms, it’s perhaps not surprising that ethereum constitutes the bulk of that figure – some 86 percent – followed by Waves at 2.9 percent and NEO at 2.3 percent.

Whether that state of affairs will change is an open question, and Satis Group outlines a number of advantages in ethereum’s corner as it stands today.

“It remains to be seen whether any platform will be able to surpass Ethereum’s adoption, which has a high degree of first mover advantage (nearly a three-year head start, plus the entire market share of the ICO discovery phase through 2017) in addition to high levels of community support, liquidity, and developer buy in,” the report states, adding:

“Emerging platforms have been able to differentiate themselves with higher levels of transaction throughput (transactions per second), which generally comes at the cost of higher levels of centralization.”

Scams prevalent

Yet for all of the growth around these crypto-assets, the report also came to a troubling conclusion: the vast majority of ICOs launched to date have proven to be fraudulent in nature.

The report calls them “Identified Scams” – that is, projects that “did not have/had no intention of fulfilling project development duties with the funds, and/or was deemed by the community (message boards, website or other online information) to be a scam.”

“On the basis of the above classification, as a percentage of the total number of ICOs, we found that approximately 78 [percent] of ICO’s were Identified Scams, ~4 [percent] Failed, ~3 [percent] had Gone Dead, and ~15 [percent] went on to trade on an exchange,” the report states.

Other researchers have looked at projects that failed to maintain traction in the months following their respective sales.

A recent report from a team at Boston College similarly found that more than half of the token projects they examined fell into inactivity within four months of the sales.

Yet in terms of the actual dollars that have gone into ICOs, Satis found that just 11 percent of funding went to those it identified as scams, or about $1.7 billion. That figure actually drops to a minute 0.3 percent when you cut out the three biggest scams – Pincoi, Arisebank and Savedroid – that have been identified.

Regulatory shift

The report also details how many projects have been seeking sunnier shores, so to speak, in terms of finding more appealing regulatory environments.

The number of ICO fundraising projects based in the Cayman Islands rose from a reported 3% to 40% in the last year while the U.S. faced a sizeable drop from 32% to 10%.

Hinting to subsequent reports yet to be published by Satis Group, author Sherwin Dowlat wrote that a more comprehensive analysis into the “wide variety” of regulatory approaches taken by states within the U.S. specifically would be provided “in a subsequent note.”

This being the second in the research series, Satis Group is set to publish three more reports all aimed at delivering “a comprehensive understanding of the pillars that comprise the crypto-asset universe.”

Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

Author Christine Kim 
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How to Read a Whitepaper

When it comes to evaluating the potential of a cryptocurrency project, especially one at initial coin offering (ICO) stage, the first place to start your analysis is always the project’s whitepaper.

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The purpose of a whitepaper in the cryptocurrency space is to explain in detail what a project entails. This includes an explanation of the product and the technology behind it, the problem the product will solve, details about its digital token, as well as information on the project’s founding team and its road map for the platform.

The most famous cryptocurrency paper is the Bitcoin whitepaper titled ‘Bitcoin: A Peer-to-Peer Electronic Cash Payment System’, which was published by Satoshi Nakamoto, the mysterious creator of Bitcoin, in 2008 and led to the creation of the first decentralized digital currency.

In this guide, you will learn how to read a whitepaper so that you are off to a good start when it comes to analyzing your next potential cryptocurrency or ICO investment.

Why Read the Whitepaper?
The three main reasons to read a cryptocurrency whitepaper is to understand the project, to discover whether the issue that the project aims to tackle can be solved using this blockchain solution and whether this project’s digital token makes sense as an investment.
The information contained in the whitepaper should answer all of these three key questions.

What to Expect in a Whitepaper

A whitepaper’s abstract is there to give you a quick overview about the project and to lure you in to read the entire paper to find out more about the project and its cryptocurrency.
The introduction often introduces basic concepts such as the blockchain and the benefits of cryptocurrencies and discusses the market that this specific blockchain project aims to enter.
Problem Definition
The problem definition digs a little deeper into the market the project is targeting and highlights the challenges found in this industry that need to be solved. The challenges can be technological or business-related. It may also include current solution that are not sufficient enough to fully address the problem at hand.
Product Description
Next you will find the project’s product description, which will detail what the platform, product or service does, how it will function, and why it provides an excellent solution to the before-mentioned problem.
Technical Details
This will be followed up by the technical details of the blockchain project, which will be an in-depth technical explanation of how the product is being developed, what technological specification it has and how its coin or digital token will come into play.
The Digital Token
The next section goes deeper into how the digital tokens or new coin will function, what kind of money supply management will be put in place, and how it will benefit the users of the new platform and/or the cryptocurrency community at large.
Crowdsale Details
If the whitepaper has been published as part of a token sale, then you will find details about the crowdsale next. This will include all relevant launch dates, any bonus schemes, details about who can and who cannot invest, how the raised funds will be used, the project’s roadmap, etc.
Team Presentation
Towards the end of the whitepaper you will usually also find a presentation of the project’s founding members and lead developers. This is important as a strong experienced team is an integral part of a successful cryptocurrency project. Hence, you will find the professional experience of each team member and the role they will play in the project in this section.
Finally, the whitepaper will end with a conclusion, which summaries the project’s key points and usually also acts as call-to-action to get involved in the case of an upcoming token sale.

Scan for the Important
If you are looking at several new projects to potentially invest in and want to get a quick overall impression of a project before digging deeper, you can also scan the whitepaper to find the answer to the most pressing questions you should ask yourself before investing in a cryptocurrency project.

These questions include: Is the project legitimate? Is the team experienced enough that it deliver? Is there a market for the proposed product or service? Who are the competitors? What function will the token have? Could this token be replaced by an existing cryptocurrency? Etc.

Conduct Further Research
While a project’s whitepaper should cover all important aspects of a cryptocurrency project, if you are planning on making a sizable investment, your research should not stop there.
Platforms such as Reddit and the BitcoinTalk Forum tend to provide insights from cryptocurrency community members, independent ICO reviews can also provide valuable insight and asking a project’s team questions directly on their Telegram or Slack channels should also be part of a through analysis of a blockchain project before purchasing its token.

Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

Author: Alex Lielacher
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‘Operation Crypto-Sweep’ has begun!!

A group of state securities administrators in Canada and the United States that opened 70 investigations into potentially fraudulent cryptocurrency ventures last month says that almost half are set to face “completed or pending enforcement actions.”

Per Reuters, a cryptocurrency scam-busting task force operated by the cross-border North American Securities Administrators Association (NASAA) announced a “wide-ranging series of probes,” which it has named “Operation Crypto-Sweep.”

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The task force is charged with investigating unregistered ventures and initial coin offerings (ICOs) promising investors high returns with insufficient warning about possible risks.
The task force has sent cease and desist letters to several firms. Reuters says these include companies with “websites that relied on fake addresses and photos to appear legitimate when seeking investors.”

The body says it will take additional enforcement action against companies that attempt to “defraud” cryptocurrency investors.

The NASAA president and director of Alabama’s Securities Commission, Joe Borg, is quoted as saying, “The actions we’ve taken to date are just the tip of the iceberg. You’re going to see a lot more collaboration and cooperation going forward.”

As previously reported, having reviewed documents produced for 1,450 ICOs, The Wall Street Journal found 271 project with some sort of red flag, ranging from plagiarizations to fake teams. The red-flagged offerings have raised more than USD 1 billion total, while investors have so far claimed losses of up to USD 273 million in these projects.

Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

Author: Tim Alper
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