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Deception in crypto-space under regulator scrutiny

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Deceptive marketing and selling of cryptocurrencies via initial coin offerings (ICOs) has caught the regulator’s eye, as the risks associated with ICOs can be poorly understood by investors.

The Australian Securities and Investments Commission (ASIC) has announced that it will be paying particular attention to misleading or deceptive conduct in the ICO space, as misleading offers can come with “significant risks for investors that are often not disclosed or well understood”.

Noting that conduct of this type is prohibited, ASIC said it is issuing inquiries to ICO issuers and their advisers where it has found examples of deceptive conduct.

ASIC said some issuers have already began halting or modifying their ICO structure.

The regulator said it is using powers granted by the Australian Competition and Consumer Commission (ACCC) on 19 April 2018 to take action against issuers exhibiting deceptive conduct in the ICO marketing or selling space.

These delegated powers apply to deceptive behaviour, even if the ICO doesn’t involve a financial product.

It pointed to a recent case in which ASIC acted to protect investors at risk of an ICO which involved misleading statements in the white paper and which was ultimately an unregulated managed investment scheme.

As such, the offeror would have breached the Corporations Act had the offer advanced.

Commenting on the scrutiny, ASIC commissioner John Price said: “If you are acting with someone else’s money, or selling something to someone, you have obligations.

“Regardless of the structure of the ICO, there is one law that will always apply: you cannot make misleading or deceptive statements about the product. This is going to be a key focus for us as this sector develops.”

Deception in crypto-space under regulator scrutiny
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