U.S. Securities and Exchange Commission (SEC) Co-Director Steven Peikin excoriated initial coin offering (ICO) scamsters during a public discussion about cyber crime and the evolving technological landscape.
At the panel, which took place at New York University on September 5, prominent SEC officials including chairman Jay Clayton expressed concern that American investors do not appreciate the immense systemic risks that cyber crime presents.
“I am not comfortable that the American investing public understands the substantial risks that we face systemically from cyber issues,” the New York Times reports Clayton as saying. “I’d like to see better disclosure around that.”
Stephanie Avakian, co-director of the SEC enforcement division, revealed that ICOs have become a growing concern within the agency. It’s easy to understand why. A recent report from blockchain-tracing firm Chainalysis stated that Ethereum-based cyber crimes have netted attackers more than $225 million. Most victims fall prey to phishing scams, not the high-profile hacks and exploits that frequently make the news. Chainalysis estimates that 10% of all funds marked for ICO investment are stolen by cyber criminals.
Indeed, the SEC has placed a particular focus on ICOs during recent months. Notably, they ruled that ICO tokens may be subject to securities regulations and thus fall under SEC jurisdiction. In August, the agency temporarily suspended securities trading for several public cryptocurrency firms. A statement published by the agency’s Office of Investor Education and Advocacy warned investors that these microcap companies–whose shares are often traded over the counter–might attempt to scam investors into pumping up the company’s stock price by claiming to be involved with ICOs or other blockchain-based projects.
Co-director Steven Peikin went a step further, calling these ICO scamsters “roaches”:
As with any kind of newsworthy event, roaches kind of crawl out of the woodwork and try to scam money off of investors.
These comments from SEC executives come just days after the People’s Bank of China (PBoC) issued a blanket ban on ICOs. Many people within the cryptocurrency industry fear that the SEC is preparing to crack down on ICOs, too. Others, such as Chainstone Labs CEO Bruce Fenton, argue that those fears are overblown and that startups should not have much trouble complying with already-existing securities regulations.