State Regulators Say They Disrupted 220 COVID Scams

The North American Securities Administrators Association’s COVID-19 Enforcement Task Force said Wednesday that it has detected 244 pandemic-related schemes and taken action to disrupt 220 of them.

The task force, formed in April and led by NASAA’s Enforcement Section and Enforcement Technology Project Group, announced during a Zoom cast that to date, state and provincial securities investigators have said the schemes to defraud investors and consumers include 154 investment-related schemes and 90 non-investment schemes.

Task force members reported Wednesday that they’ve taken 220 distinct actions via administrative, cease-and-desist orders, referrals to other regulators and to social media and hosting companies.

The task force is using online investigative techniques to identify websites and social media posts that may be offering or promoting fraudulent offerings, investment frauds or improper unregistered regulated activities.

As of April 20, the task force has identified up to 200,000 coronavirus-related domains,  with most of the domains appearing to have been created since the beginning of 2020.

“Con artists follow the headlines, so it should be of no surprise that COVID-cons are targeting investors,” said Christopher Gerold, NASAA president and chief of the New Jersey Bureau of Securities. “Some of these investors are just seeking greater returns while others may have lost a job and are worried about market volatility and making ends meet. We are putting con artists on notice that state and provincial securities regulators are taking swift and effective action to protect investors from their schemes.”

The task force includes 111 investigators representing 44 jurisdictions in the United States, Canada and Mexico.

The schemes “often exploit trendy assets such as cryptocurrencies or mysterious programs involving forex trading and even investments powered by futuristic artificial intelligence — the types of products that may sound appealing, but also the types of products unfamiliar to inexperienced retail investors,” said Joe Rotunda, director of enforcement for the Texas State Securities Board and vice chair of NASAA’s Enforcement Section.

For instance, the Texas State Securities Board has issued emergency cease-and-desist orders against Mirror Trading International, Kenzley Ramos and James “Stormy” Walsh.

Jake van der Laan, chief information officer with the New Brunswick Financial & Consumer Services Commission and chair of NASAA’s Enforcement Technology Project Group, noted that NASAA’s Canadian task force members accounted for more than one-quarter of the actions taken.

“These actions included disrupting several suspected frauds promoted through social media,” said van der Laan. “We appreciate the responsiveness of social media platforms in recognizing that the removal of illegal content disrupts schemes and proactively protects the public from abuse.”

The Ontario Securities Commission, for instance, warned about the “aggressive stock promotion” of Crestview Exploration Inc., a junior gold mining company based in British Columbia and listed on the Canadian Securities Exchange and the Frankfurt Stock Exchange.

The OSC stated that it’s aware of an unsolicited letter that has been mailed to residents of Ontario, British Columbia, Saskatchewan and Alberta over the last few weeks.

“The letter appears to make exaggerated claims about Crestview, predicting that its stock price “will soar as the recession hits” and invites recipients to download a research report from a website, OSC said.