California Fraud Cases Highlight Need for Regulatory Crackdown on Crypto

Recent cases of crypto fraud are a timely reminder to do our due diligence until regulators take more action. If something seems too good to be true, it probably is.

The California Department of Financial Protection and Innovation (DFPI) announced last month that it had issued cease and desist orders to 11 entities for violations of California securities laws. Some of the highlights included allegations that they were offering unqualified securities as well as material misrepresentations and omissions to investors.

These breaches should remind us that while crypto is a unique and exciting industry for the general public, it is still an area rife with the risk of bad players and fraud. To date, government regulation of crypto has been minimal at best, with a noticeable lack of action. Whether you're a full-time professional investor or just a casual fan who wants to get involved, you need to be absolutely sure what you're getting into before getting involved in any crypto opportunity.

California has attempted to implement a crypto-specific business registration process for those looking to do business in the state. The proposed framework was opposed by Governor Gavin Newsom because the resources required to establish and enforce such a framework would be prohibitively expensive for the state. While this type of compliance infrastructure has yet to be used, it underscores regulators' concerns about the crypto industry.

There seems to be a trend that new industries, especially those that are attracting as much international attention as crypto, are particularly susceptible to fraud. You only have to go back to the legalization of cannabis to find the last time California had to deal with fraudulent schemes on this scale.

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