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Maryland Attorney General joins effort to ensure investments in virtual currency are real

Maryland has joined a national effort to warn the public about cryptocurrency scams and crack down on the fraudsters that offer bogus investments in start-up companies offering new forms of virtual money and platforms to sell the currency.

Brian E. Frosh, Maryland’s attorney general, said Wednesday that his office’s securities division is participating in “Operation Cryptosweep,” an initiative of the North American Securities Administrators Association. That group reports that U.S. and Canadian regulators have taken 35 civil enforcement actions since April 2018 against initial coin offerings, called ICOs, and cryptocurrency-related investment products.

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Cryptocurrency, which includes Bitcoin, exists only online and transactions are made using software called digital wallets.

Officials say not all investment offers are scams, but cryptocurrency is relatively new and has at times garnered headlines about surging values, and Frosh said that can attract scam artists. He wants potential investors and users to be wary, especially of offers of quick profits, and do some research.

“Cryptocurrency investments are risky," Frosh said in a statement.

Joining a national effort to warn consumers about the risks of cryptocurrency, Maryland Attorney General Brian Frosh said to be wary of offers too good to be true. Kim Hairston/Baltimore Sun staff.
Joining a national effort to warn consumers about the risks of cryptocurrency, Maryland Attorney General Brian Frosh said to be wary of offers too good to be true. Kim Hairston/Baltimore Sun staff.

“Investors should be extra cautious when dealing with promoters who claim their offering does not have to be registered with securities regulators,” he said. "Quick returns of 150% are as rare as Bigfoot. Make sure to do independent research [on] the product before you invest. Be aware of the risks, and contact the Maryland Securities Division with any concerns before parting with your hard-earned money.”

Companies and agents have to register with state securities regulators only under certain circumstances, such as when they are selling the currency as an investment or they are selling a platform for currency trading, and not for merely accepting cryptocurrency.

In Maryland, the securities division has closed one enforcement action, against a company called Browsers Lab LLC. The securities division issued a cease and desist order against the company last year for the offer and sale of unregistered securities, acting as and employing an unregistered broker-dealer or agent and material misrepresentation or omission.

The securities division said the company was a Bitcoin trading platform and led investors to believe they could earn as much as 150% through passive investments.

The company is no longer operating, its website has been taken down and company officials did not respond to an email request for comment.

The state has initiated a second action against another company that it believes has violated Maryland securities law, but that case has not been resolved.

The state’s securities division is promoting a video produced by the securities association that outlines common schemes and ways to avoid them. It also touches on issues to consider such as the high level of volatility of cryptocurrency markets, the industry’s light regulatory oversight and the untraceable nature of currency that exists only online and can be lost to fraud or security breach.

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