Nasdaq CEO Says Lack of Oversight on ICOs Presents 'Serious Risks' to Retail Investors

Lack of information is one of the reasons why investors are getting pulled into fraudulent initial coin offerings (ICOs). And Nasdaq CEO Adena Friedman completely agrees.

Recently, Friedman expressed her concerns regarding ICOs and how they can present a “serious risks” to retail investors, Cointelegraph reported. She shared this sentiment when she spoke during the Future of Fintech conference held in New York on Wednesday. Besides the lack of information, Friedman also pointed out insufficient regulation, accountability, and transparency as major factors in the proliferation of ICO fraud.

"To make it no rules at all, when companies can just willy-nilly take people's money and offer no information at all, with no governance, that sounds to me like you're taking advantage of people,” Friedman said. She added that while the U.S. Securities and Exchange Commission compels companies to disseminate information the same way a bank does during Initial Public Offerings (IPO), the ICO process has little supervision to ensure that this takes place.

As a result, investors get duped by bogus companies that take off with millions of dollars after launching their ICO. The proliferation of such illegal practices forced the SEC to impose strict regulations on this new capital-raising endeavor.

Jay Clayton, chairman of SEC, said in a recent interview that almost all ICOs he observes today are considered securities. Of course, such a perspective has been met with resistance by those operating in the crypto sphere, arguing that their assets should not be labeled securities.

According to Clayton, the agency classifies an asset as a security if the investor is expecting money in return for the capital provided to a startup. The SEC has already clarified that Bitcoin and Etherum will not be considered securities, but other virtual currencies are still subject to evaluation.

As for the concern of Friedman, one of the things that the SEC can do is to spread useful information to allow investors the ability to differentiate between a legitimate ICO and a fraudulent one. To be precise, the agency can mirror what China did when the country aired on national television an hour-long discussion of blockchain, cryptocurrency, and the various dangers and advantages that the disruptive technology possesses.

The SEC could invite prominent individuals operating in the crypto realm and have them talk about the basics of the crypto industry. And the market is already making its own waves in the mainstream media anyway, case in point the promotional stunt that Ashton Kutcher pulled on Ellen when he donated $4 million to Ellen’s wildlife foundation on behalf of Ripple.