US state regulators report a 'sharp rise' in tech and digital asset related investigations

U.S. state securities regulators say the bulk of their investigations and enforcement actions in 2023 stemmed from technology and digital assets.

In new investigations opened in 2023, 343 cases involved digital assets, 144 involved staking and 205 cases involved fraud in social media. Those figures "increased significantly" from 2022, the North American Securities Administrators Association said in a statement earlier this week.

Throughout the calendar and fiscal year in 2023, state regulators also reported 214 cases involving stocks and equities and 145 cases involving Ponzi and pyramid schemes, according to a 2024 enforcement report released on Tuesday. The report was done through a survey of NASAA members and includes responses from 49 of the association's member jurisdictions.

“Fraudsters often exploit the buzz that comes with innovation and technology to take advantage of investors. Combine that with the many ways in which technology and social media link us together and bad actors find significant opportunities to try and rip off investors,” said Leslie Van Buskirk, NASAA president and administrator, division of securities, Wisconsin Department of Financial Institutions, in the statement.

U.S. regulators have zeroed in on bringing enforcement actions against the crypto industry. NASAA has worked in parallel with agencies, such as the U.S. Securities and Exchange Commission to bring charges, including one against TradeStation Crypto, Inc., for failing to register the offer and sale of a crypto lending product earlier this year.

The jump in enforcement actions involving digital assets, social media and the internet appears to be connected to an increase in complaints, referrals and "enforcement matters involving pig butchering and other scams," according to NASAA's 2024 enforcement report. Pig butchering scams involve scammers gaining victims' trust, convincing them to give them large amounts of money and then running off with it. Lawmakers and regulators have raised concerns over those types of scams over the past few months.

State securities regulators also focused on interest and earn products, high-yield investment projects and staking, according to the report.

"Many states have issued actions alleging that providing staking as a service is an unregistered securities offering," the regulators said. The SEC has also said it views some staking programs as unregistered securities.

Earlier this week, the SEC said it planned to hone in on crypto next year, according to its 2025 Examination Priorities Report. The agency said it will focus on monitoring those offering "crypto-asset related services" as well as "other activities involving crypto assets that are offered and sold as securities or related products, such as spot bitcoin or ether exchange-traded products." The SEC approved both of those products earlier this year.