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FCNB Explains How Canadians Can Avoid Fraudulent ICOs, Including a Recent “Cryptobank” Scam

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The Financial and Consumer Services Commission New Brunswick (FCNB) investigated California-based Bitcoin-bank.io after discovering an advertisement for their investment services on a Canadian online classified website.

“Canadian securities regulators are monitoring the cryptocurrency environment because investors are being targeted more and more by fraudsters online to invest in cryptocurrencies and related financial “products,” said Jake van der Laan, FCNB’s director of enforcement and chief information officer, in a statement to Coinsquare Discover.

The FSNB warning is a continuation of the trend of Canadian authorities offering advice on how to separate honest actors from scams, starting with the Better Business Bureau of Canada.

Illegal operation in New Brunswick

In an investor warning of March 5th, 2018 the New Brunswick arm of the Canadian Financial and Consumer Services Commission (FCSC) encourages Canadians who have been approached or targeted to invest in Bitcoin-bank.io to report this to the FCNB.

Bitcoin-bank.io is not registered to trade in, or advise on, securities or derivatives in New Brunswick or anywhere in Canada, making it illegal for Bitcoin-bank.io to carry out activities in the province.

The FCSC found no record of the company at its listed California address and that Bitcoin-bank.io “team” photos on their website were taken from other websites and had fake names attached. Further, the FCSC found that ontent on the Bitcoin-bank.io’s site had also been copied from other websites.

Bitcoin-bank.io claims to be a “cryptobank” offering payment card solutions, wallet services, and an ICO which began in February for its BTCB coin. They claim to offer users the facility to profit on a daily basis from digital currency savings through short-term lending.

Protecting Canadian investors

The FCNB is responsible for the administration and enforcement of provincial legislation in relation to securities and other financial and consumer products.

“Regulators across Canada are seeing an increase in cryptocurrency related fraud online, usually heavily promoted using social media,” commented van der Laan to Coinsquare Discover. “We believe being an informed investor is the best way for Canadians to protect their money. Investors need to weigh and understand the significant risks and exercise extreme diligence in ensuring that whoever they deal with is not a fraud.”

The FCNB is working to educate the New Brunswick public about the risks related to digital currency products. Their fraud awareness campaign, in conjunction with fraud awareness month, includes TV and social media ads and supporting activities. They believe the best way for Canadians to avoid fraud is to understand the tactics and schemes they may be exposed to.

“If we find a company is not compliant with our securities legislation and is trading or advising in securities or derivatives within our jurisdiction, we have the ability to issue a cease trade order and follow that up with other enforcement measures,” continued van der Laan.

The FCNB and CSA support credible fintech firms

The FCNB is a member of the Canadian Securities Administrators (CSA) Regulatory Sandbox, both of which welcome digital innovation. The sandbox is an initiative to support fintech businesses in Canada.

“We want to encourage financial market innovation and facilitate fintech businesses in their capital raising while at the same time ensuring fair and efficient capital markets and investor protection,” said van der Laan. “As cryptocurrencies become more popular and mainstream, balancing the demand for new investment opportunities and the need to protect investors from high-risk or fraudulent activities is extremely important.”

The CSA is also forming links globally to aid the growth and innovation of fintech firms. Regulators in eight provinces formed an agreement in February with the AMF of France to increase global opportunities.

ICO Regulation in Canada and the U.S

Canadian and U.S regulators are actively monitoring potentially fraudulent ICO’s and protecting investors. Surveillance by the CSA identified the potential threat posed by Bitcoin-bank.io.

In the U.S, the Securities and Exchange Commission (SEC) is clamping down on ICOs which may violate securities laws. In the past week, rumours broke via the Wall Street Journal that the SEC’s cyber unit has sent a number of subpoenas to companies they suspect might be operating illegal ICOs. The SEC expects ICOs to register with the U.S agency but are finding they are slow to do so.

SEC chairman Jay Clayton revealed in comments to the Senate banking committee zero ICOs had registered with the U.S SEC up to February 6th, 2018.

“Many ICOs [initial coin offerings] are being conducted illegally,” said Clayton “Their promoters and other participants are not following our security laws. Some people say that’s because the law isn’t clear. I do not buy that for a moment.”

In Canada, any business with a digital currency-related offering is encouraged to contact their local securities regulatory authority to discuss their approaches to compliance. The CSA recently published a number of positive authorizations for digital currency investment funds demonstrating credible Canadian businesses are following the right routes and seeking regulatory support and approval.

 

Image credit: FCNB logo

 

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