SEC Goes After Sites Offering Crypto-related Daily Returns Up to 4.5%

The SEC has targeted the operators of dozens of fraudulent websites that it alleges were offering “exorbitant returns” for investments in a range of securities offerings, including crypto asset mining pools.

While the US securities regulator has gone after crypto companies for what it claims to be potential securities violations, the latest signals its continued enforcement spree against what Eversheds Sutherland partner Adam Pollet called “garden-variety” fraud and misappropriation where crypto serves as the bait. 

“Stamping out run-of-the-mill fraud [and] misappropriation in the guise of crypto is a good way to rid bad actors who would leverage the appeal of crypto,” he told Blockworks.

The returns promised by those behind the sites reached as high as 61.9% in 24 hours, the SEC said in a Thursday complaint filed in Massachusetts’ federal district court.

Defendants include the unknown operators of websites such as GA-Investors.org (GAI), which “guaranteed” daily returns ranging from 2% to 4.5%, according to the regulator.

The defendants in the latest SEC action required individuals to create a private account on GA-Investors.org in order to invest. These private account pages included a digital wallet address that was controlled by GAI, the SEC alleges.

“Investors were then directed to purchase crypto assets from a separate crypto asset trading platform and transfer those crypto assets to GAI by sending them to the GAI wallet address listed on the private account page,” the complaint states.

The GA-Investors.org site is no longer accessible.

Others linked to the entity, however, continue to offer similar investments in securities. In addition to stocks, bonds and ETFs, these include investments in crypto asset mining and crypto asset ATMs, among others.

Leave the ‘good’ actors alone, lawyer says 

Pollet told Blockworks it is important for regulators to remove bad actors and let the good ones operate. 

“But that’s not the current tact of the SEC,” said in an email. “Instead the SEC is targeting everyone in the industry, including exchanges, which is arguably not a productive way to regulate the industry.”

“We expect the crackdown on the industry to continue,” Pollett added.

The SEC served Coinbase with a Wells notice in March, for example. The exchange sued the SEC in an effort to gain clarity on the regulations the regulator is trying to enforce on crypto. 

Various crypto industry players — as well as the US Chamber of Commerce — have come out in support of Coinbase in recent days by filing amicus briefs. 

The Crypto Council for Innovation argued that by continuing with an enforcement-only approach, “good actors” in the industry have “no viable path” forward.

---

Get the news in your inbox. Explore Blockworks newsletters:

• The Breakdown: Decoding crypto and the markets. Daily.
• 0xResearch: Alpha in your inbox. Think like an analyst.