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California Fraud Case Highlights Need for Regulatory Crackdown on Cryptos

The California Department of Financial Protection and Innovation (DFPI) announced last month that it had issued injunctions against 11 entities for violating California securities laws. Some of the highlights included claims that they provided ineligible securities and material misrepresentations and omissions to investors.

These violations serve as a reminder that while cryptocurrency is a unique and exciting industry for the general public, it remains an area rife with potential for bad players and fraud. To date, government crypto regulation has been minimal at best and lacks clear action. And you have to be completely sure what you’re doing.

California has toyed with setting up a cryptocurrency-specific business registration process for those looking to do business in the state. The proposed framework was rejected by Gov. Gavin Newsom because the resources required to establish and implement such a framework would be prohibitive for the state. This kind of compliance has not yet been adopted by his infrastructure, but the regulator has raised concerns related to the cryptocurrency industry.

There seems to be a pattern in newer industries, especially those that are gaining as much international attention as cryptocurrencies, being particularly susceptible to fraud. We’ll have to go all the way back to cannabis legalization to find the last time California had to deal with a fraudulent scheme on this scale.

Related: From Axie Infinity to Bored Apes, the Federal Government is Coming to the Metaverse

Known as a pioneer in regulation and compliance, it seems inevitable that California will create some form of crypto-specific compliance infrastructure in the name of consumer protection. If history shows, once California releases a framework, other states will follow suit.

Federal and state representatives have tried to draft legislation to establish financial standards for cryptocurrencies, but have had little luck so far. At the federal level, Senators Cory Booker, John Thune, Debbie Stavenau, and John Boozman proposed a bill authorizing the Commodity Futures Trading Commission (CFTC) to act as a cryptocurrency regulator. , and Senators Kirsten Gillibrand and Cynthia Ramis jointly sponsored legislation to establish clearer guidance on digital assets and cryptocurrencies. Lawmakers have reached out to high-profile technologists such as Mark Zuckerberg to complicit in crypto fraud.

Source: Chainalysis

While we do not expect these or other similar crypto-focused legislation to pass in 2022, this level of bipartisan cooperation is unprecedented these days. This collaboration should reflect the magnitude of the need for regulatory frameworks. Put another way, Democrats and Republicans talking to each other about anything should stop the press, but the fact that they’re co-sponsoring multiple bills is a tremendous requirement for guidance. It should teach us.

If governments do not establish control over crypto, how should they approach investing in the crypto space? Here are some general points to consider when presented with a crypto investment opportunity.

Related: GameFi developers could face hefty fines and hardships

Be very careful when considering opportunities. Don’t take anyone’s word for it unless you have some substantive support. If cryptography is not your area of ​​expertise, contact a qualified and experienced professional. If possible, be sure to utilize crypto monitoring and blockchain analysis tools as part of the vetting process.

A common strategy of scammers is to put undue pressure on the chances of closing a deal or to set artificial timelines. Slow down the process and use all the time you have to make an investment decision.

If it sounds too good to be true, it probably is. The cliché may be bloated, but it makes a valid point. There have been examples of schemes that pay initial and ongoing dividends to new investors brought in, and offer to pay additional dividends from those new investors brought in. This is what pyramids or multi-level marketing If it sounds like a scheme, so be it. Words such as “no-risk investment” are also thrown around. Ultimately, if no one knows where the opportunity will come from, beware.

Cryptocurrencies can be a fun and exciting topic with many legitimate opportunities, but there are lack of government oversight and bad players who take advantage of the excitement of overzealous or uneducated investors. increase.

Zach Gordon He is a Certified Public Accountant (CPA) and Vice President of Accounting for Cryptocurrencies at Propeller Industries, where he is Partial Chief Financial Officer and Advisor to a portfolio of Cryptocurrency and Web3 clients. He was named a Forty Under 40 CPA, is a member of the NYSSCPA’s Digital Assets Board, and has worked with cryptocurrency clients in various capacities since 2016.

This article is for general information purposes and is not intended, and should not be construed as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author and do not necessarily reflect or represent the views or opinions of Cointelegraph.

California Fraud Case Highlights Need for Regulatory Crackdown on Cryptos

Source link California Fraud Case Highlights Need for Regulatory Crackdown on Cryptos

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