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‘Operation Cryptosweep’ : Canadian regulators join forces with global market watchdogs to root out cryptocurrency-related investment fraud ,

May 22nd, 2018 | by Richard Paul
‘Operation Cryptosweep’ : Canadian regulators join forces with global market watchdogs to root out cryptocurrency-related investment fraud ,
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Investors warned about five Ontario firms in global investigation ‘Operation Cryptosweep’

Canadian regulators join forces with global market watchdogs to root out cryptocurrency-related investment fraud

The OSC is encouraging investors to be on the lookout for unauthorized unregistered cryptocurrency offerings, and potentially fraudulent schemes that promise high returns.Getty Images

Canadian securities regulators have joined forces with capital markets watchdogs in the United States to scour the cryptocurrency landscape for potentially fraudulent schemes.

“Operation Cryptosweep, a coordinated effort involving 40 state and provincial regulators, led to a number of warnings and investor alerts about schemes involving cryptocurrency-related investment products, including five in Ontario.

The British Columbia Securities Commission issued letters to 12 offshore companies that advertise initial coin offerings in B.C., asking that they cease activities in the province until they are compliant with applicable laws.

“Fraudsters are always looking for new ways to attract victims and many are taking advantage of the popularity of cryptocurrencies to perpetrate their schemes,” said Doug Muir, director of enforcement at the B.C. Securities Commission.

“While not every ICO or crypto-asset related investment is a fraud, the BCSC encourages investors to exercise caution and do their research before making an ICO or cryptocurrency related investment,” he said in a statement.

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In a separate statement, the OSC warned investors about five firms targeting investors in Ontario — BTCReal, BitSerial, Hypercube Ventures LP, CabinCoin OÜ, and BaapPay Inc. — which the regulator says “are not registered in Ontario to solicit investments or provide advice on investing in, buying or selling securities.”

The OSC is encouraging investors to be on the lookout for unauthorized unregistered cryptocurrency offerings, and potentially fraudulent schemes that promise high returns.

“Investors should consider the risks associated with investing in cryptocurrencies, and be aware that the marketing of high returns is often an indication of investment fraud,” the regulator said.

Operation Cryptosweep identified hundreds of initial coin offerings being advertised on “aggregation sites” formed to attract investor interest, and about 30,000 crypto-related domain name registrations, mostly done since 2017, according to the BCSC.

In an exclusive interview with the Financial Post in December, OSC chair Maureen Jensen warned of a “mania” around technology-based coin or cyptocurrency offerings.

“You can see what’s happening in the marketplace – it’s going crazy,” Jensen said at the time, adding that the OSC was working with other provincial regulators on ways to protect investors drawn to the popular investment vehicles. Initial Coin Offerings (ICOs) soared along with the price of the original cryptocurrency, Bitcoin.

Regulators around the world have begun to step up scrutiny of the marketplace, and Britain’s Financial Conduct Authority pledged late last year to look into whether new rules are needed to bolster investor protection.

In an “alert” late last week, the OSC warned about a handful of crypto firms that appear to be targeting Ontario investors, which do not appear to be registered or have the necessary exemptions to solicit investments or provide advice.

One of the firms, BTCReal, “claims it can provide investors with high returns in short periods of time, the regulator said. Through a website, btcreal.biz, the firm claims to provide full investment services for cryptocurrency-related investments and foreign exchange.

Bitserial, another firm named in the investor alert, also operates a website, bitserial.io, “which claims to offer opportunities to invest in ‘BTE Tokens.’” It “also encourages investors to participate in a lending program where they can exchange Bitcoin, Litecoin, or Ethereum for BTE Tokens that are ‘lent out’ for high returns,” the OSC says.

CabinCoin OÜ, another firm identified in the alert, claims that the future value of tokens it sells “will far exceed their initial price,” according to the OSC. CabinCoin operates the websites cabincoin.com and cabincoin.exchange, and is advertising an unregistered token sale for “CabinCoin Tokens.”

BaapPay Inc., which manages the website baappaytoken.com, is also currently advertising an unregistered token sale, according to the OSC.

Hypercube Ventures LP, another firm identified in the regulator’s investor alert, manages the websites hypercube.vc, hypercube.fund, vnn.money and vnn.cash, which encourage investors to buy “emission pools” for the purpose of generating “VNN cryptocurrency.”

Any distribution to an Ontario resident requires a prospectus, or exemption from the prospectus requirement, “which Bitserial, Hypercube, CabinCoin and BaapPay do not have,” the OSC warned.

“To avoid investment fraud, investors should always check that they are dealing with a registered individual or firm, and should carefully consider the risks associated with investing in this novel space,” said Leslie Byberg, executive director and chief administrative officer of the OSC.

• Email: bshecter@nationalpost.com | Twitter: hqdefault (13)

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