Over 70% of Crypto Communications Contain Potential Violations: FINRA
The Financial Industry Regulatory Authority (FINRA) reported this week that about 70% of crypto-related communications from a recent survey contained potentially false or misleading claims.
In a report released on January 23, FINRA said it reviewed over 500 crypto asset-related retail communications starting in November 2022. The financial watchdog found that over 70% of the communications reviewed had “potential substantive violations” of its rules on communications with the public.
“With the growth in this market and increased interest in crypto assets, the potential harm caused by problematic communications has also increased,” said Ira Gluck, a senior director at FINRA.
Gluck noted that crypto-related communications could range from a podcast to a commercial during the Super Bowl. Violations potentially included misleading claims about crypto and misrepresenting how the protections of federal securities laws apply to digital assets.
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Key details:
- FINRA reviewed over 500 crypto-related retail communications starting in November 2022.
- Over 70% contained potentially false, exaggerated, or misleading claims.
- Violations included misleading statements about digital assets and securities law protections.
- FINRA says “problematic communications” in the crypto market pose growing harm.
Crypto communications under scrutiny
FINRA added that the targeted exam provided crypto firms with questions to consider regarding their public communications. The regulator launched a review of crypto-related public communications after the collapse of the cryptocurrency exchange FTX in November 2022.
FTX, before its bankruptcy, engaged in a substantial marketing campaign in the digital asset space, including celebrity endorsements, sports venue sponsorships, and numerous media appearances by former CEO Sam Bankman-Fried.
FINRA, as a non-governmental regulator, has powers granted by Congress to oversee certain areas of investor protection. FINRA has collaborated with the Securities and Exchange Commission (SEC) on approving digital asset broker-dealer licenses and penalizing violations of guidelines.
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This recent report highlights increased scrutiny of cryptocurrency communications targeting retail investors. Regulators have expressed concerns regarding inflated claims and incomplete disclosures in the digital asset realm.
The focus on retail communications follows the high-profile collapse of FTX, which had an extensive marketing presence. Other major companies, like Celsius Network and Voyager Digital, have also filed for bankruptcy in 2022 amid a broader market downturn.
