Regulations

Report Shows US Regulators Recovered Just $36 Million From 90 Crypto Scam Takedowns

Cryptocurrency-related scams and frauds have made quite a few headlines during the past year. The SEC has cracked down on countless cryptocurrency in an effort to stop said fraud cases. Now, however, a recent Wall Street Journal report reveals that the SEC has only managed to recover a relatively meager $36 million.

WSJ finds reports of fraud less likely in a bull market

More specifically, this comes after around 90 separate takedowns of cryptocurrency-related projects during the past two years.

Furthermore, it is hard to quantify just how large an amount investors have collectively lost in cryptocurrency scams, but recovering $36 million appears to be a drop in the figurative ocean.

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In addition to this, the Wall Street Journal piece also notes that investors seem to be less inclined to report instances of fraud when prices are increasing.

As an example, only four cases of fraud were reported during all of 2017 by the SEC. In comparison, five cases of suspected cryptocurrency fraud were filed by the commission just during this past November.

The report also suggests that state regulator-driven crackdowns are generally ineffective in safeguarding investors’ funds. Specifically, over 70 of state regulators’ actions during the past year have not led to any investors’ funds being recovered.

Moreover, one of the most well-known alleged frauds is that issue related to BitConnect. This supposed fraud is currently being investigated by both the SEC as well as state regulators.

BitConnect was served a cease-and-desist order by the Texas State Securities Board earlier this year. This precipitated the spectacular crash of the cryptocurrency lending platform, which at one point reached a valuation of around $2.8 billion.

Cryptocurrency-related lawsuits have also increased

However, it should be noted that it is not only the number of regulatory actions that has increased during the past year. Rather, the number of cryptocurrency lawsuits has also risen sharply during 2018.

The legal analytics firm Lex Machina has this to say in relation to the surge of cryptocurrency-related lawsuits: “The first two quarters of 2018 saw a significant rise in the number of securities cases relating to cryptocurrency or Bitcoin.”

Moreover, Lex Machina found that the number of cases increased sharply from 7 in Q3 of 2017 to 22 in Q1 of 2017, and 23 in Q2. This further illustrates how the bear market experienced during the better part of 2018 seems to have inflated the number of reported fraud cases.

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Ledger Nano S - The secure hardware wallet