Greg Bordenkircher, the first assistant at the United States Attorney’s office, has revealed that the US state of Alabama “issued nine orders shutting down businesses that [were] advertising” potentially fraudulent investment schemes, services, and products.
Bordenkircher added that Alabama has so far “got about 20 percent of all the active cease-and-desists” out of all 50 US states. Moreover, there are “another 20, 22” potential crypto-related scams that Alabama’s regulators are currently investigating, Bordenkircher told Coindesk.
Notably, Bordenkircher is part of what’s considered the largest cryptocurrency crackdown in history - which was initiated in May 2018 by the North American Securities Administrators Association (NASAA), an international organization focused on investigating financial crimes.
The primary target of these wide-reaching probes has been the large number of fraudulent initial coin offerings (ICOs). Regulators in other US states including Texas, Colorado, South Carolina, and Massachusetts have also joined the extensive investigations into crypto-related scams.
Additionally, authorities from Canada are involved in NASAA’s efforts to combat the criminal elements operating in the fragile crypto industry. When the investigation began (toward the end of May 2018), approximately 300 cryptocurrency projects had been identified as potentially fraudulent schemes.
State-Level Regulators Play Equally Important Role As Federal Authorities
However, authorities have now learned that some of these were not scams, and there are currently about 200 different crypto-related businesses under investigation, NASAA’s officials noted.
Acknowledging the efforts of the US Securities and Exchange Commission (SEC), while also clarifying the important role state-level regulators play in clamping down on illicit activity, Bordenkircher said:
The SEC does a great job and CFTC does a great job, but the states have really got the boots on the ground. There’s more of us than there are of them.
To more effectively crack down on scams, state-level and federal authorities have been coordinating their investigations by sharing critical information, Bordenkircher explained. He also noted that “it’s almost a task force view of all of us coordinating together.”
Using Cryptography To Record Tamper-Proof Evidence
Because the majority of crypto-related activity is conducted via the internet, Alabama’s regulators are working with Cyber Forensics, a consultancy that assists regulators in organizing the digital evidence accumulated during investigations - in order to present it during court hearings.
Notably, security officials working at the state-level have set up computer networks that are running advanced VPN programs, so that they can easily visit suspicious websites - without anyone being able to track their activity.
Cryptographic hashes are also used to preserve the content found on websites. The hashes are then used to verify that the data was actually logged at a particular time, and to also prove that the information was not altered.
After the required evidence has been gathered, regulatory authorities take down the fraudulent websites completely - in order to protect consumers.