“Fake” regulatory and dispute resolution entities are being used to make some crypto providers look legitimate, warns the Canadian Securities Administrators.
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Canadian citizens are being advised to double-check crypto trading service providers, as the platforms may be using “fictitious” regulatory bodies to boost their credibility.
According to a June 20 Investor Alert from the Canadian Securities Administrators, some “purported” crypto platforms are claiming to be approved by dubious regulatory authorities or dispute resolution organizations in “an effort to appear legitimate.”
“The websites appear to be credible at first glance, with references to complaint processing, dispute resolution and providing redress to aggrieved investors,” the CSA said in a statement.
Investor Alert: Some crypto websites use fake regulatory and dispute resolution organizations to appear legitimatehttps://t.co/Ptqx3RHjfg pic.twitter.com/2QIpwnJdcB
— CSA_News (@CSA_News) June 20, 2023
“But upon closer inspection, the websites’ language can be awkward and unpolished, with errors in spelling, grammar or syntax — a common ‘red flag’ of illegitimate entities.”
The CSA has labeled 10 entities as being “fictitious” regulatory bodies and organizations, including the Financial Standard Commission FSC Canada, Financial Commission/Finacom PLC Ltd., and its associated entity, Blockchain Association, among several others.
In its notice, the regulator said none of the listed entities are “known,” and has also suggested any entity claiming to be a member of the organizations is “likely fraudulent.”
Blockchain Association says its a mistake
However, in a statement to Cointelegraph, Nikolai Isayev, the chief operating officer of the accused-Blockchain Association said they ” do not agree” with the content of the notice and says they “believe the regulator made a mistake.”
“We have already engaged legal counsel in Canada and preparing a submission to CSA to remove this designation. We expect this issue to be resolved soon.”
Isayev noted that the association was created in 2018 to “unite professionals in the blockchain space” and develop best practices for using blockchain technology, including a dispute resolution for crypto traders.”
“The Association had a handful of members over the years, but has not provided any services in the last 2 years and is currently in a dormant state,” he said, adding:
“Given our experience, it is likely that unknown individuals cloned or copied our membership certificates to pursue possible fraudulent activity involving online scams, which we actually actively work to identify and actually warn the public about on a consistent basis.”
Cointelegraph also contacted crypto firms listed as members and partners of the “Blockchain Association” for comment.
In an emailed statement to Cointelegraph, On Yavin, the managing partner of Cointelligence said he was unable to give comment about the contents of the regulatory notice as they hadn’t worked or communicated with the entity with the exception of an introduction to Isayev in 2019.
“In August 2019, Mr. Nikolai Isayev reached out to Cointelligence and asked for collaboration to list us as a partner and share our content and educational materials with their audience.”
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Meanwhile, the CSA has warned that “anyone considering using a crypto firm that claims to be certified or a member of a dispute resolution organization should try to independently verify that the referenced organization actually exists.”
The regulator also advised that citizens considering investing in crypto should check the firms against those registered with the CSA. There are currently 12 crypto trading platforms authorized to do business in Canada, while there are 11 that have filed pre-registration undertakings.
Though the regulator’s statement does not address this, it should be noted that the crypto firms themselves may be unaware of the so-called “fake” certifications, and the listing of certification does not necessarily mean a platform is “fraudulent.”
The full list of regulatory bodies and entities that have been accused of being “fake” by the CSA include:
- Financial Standard Commission FSC Canada
- Financial Commission/Finacom PLC Ltd.
- Blockchain Association
- European Financial Services and Exchange Commission
- Crypto Conduct Authority/Crypto Frugal Ltd. (Ireland)
- Crypto Conduct Authority/Crypto Frugal Ltd. (U.K.)
- International Regulatory & Brokerage E-markets
- British Investment Commission/BIC PLC Ltd.
- International Financial Market Supervisory Authority
- Crypto Commission Authority/Crypto Commission Ltd.
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Update (June 21, 8:55am UTC): Added a response from Cointelligence’s managing partner On Yavin.
Update (June 21, 9:49am UTC): Added a response from Blockchain Association’s chief operating officer.