According to the Texas State Securities Board’s Enforcement Division, a four-week probe of investment offerings connected to virtual currencies has uncovered “widespread fraud.” The cryptocurrency fraud investigation took a look at investment offerings targeting investors in the state and which appeared to employ fraudulent and illegal solicitation tactics.
Of the 32 investigations conducted beginning on December 18th of last year:
- None of the promoters examined were registered in Texas to sell securities in the state.
- 30 promoters used online marketing strategies, including social media, to promote their unregistered securities to Texans.
- Several promoters had offered prospective investors a “new cryptocurrency.”
- A number of promoters guaranteed returns of up to 40% monthly, while disregarding the risks to investors that were involved.
- Just 11 promoters gave out an actual physical address, meaning that investors wouldn’t know how to find the other promoters in the event of investment losses.
- Several of the offerings offered commissions to investors who referred new investors.
As a result of the probe, the Texas Securities Commissioner has brought seven cryptocurrency fraud actions against promoters. Although Bitcoin remains the most in-demand cryptocurrency, there are at least 1600 cryptocurrencies, including Ripple, Litecoin, Thereum, Dogecoin, which has the likeness of a dog on the cryptocurrency, Potcoin for cannabis-related transactions, and My Big Coin, which is touted as being backed by gold.
To date, Texas has entered more orders against alleging cryptocurrency fraud than any other state regulator in the US.
Just this month, Texas Securities Commissioner J. Iles has filed emergency actions against unregistered promoters accused of offering high return investments in programs involving cryptocurrencies.
For example, Bitcoin Trading & Cloud Mining Ltd., also known as BTCRUSH, claims to be a cloud-based cryptocurrency mining company that mines virtual currencies. It is accused of promising Texas investors big returns from cryptocurrency mining. The state contends that videos showing such activity is actually stock footage. BTCRUSH’s main address is listed as located in London. Texan investors were purportedly told that if they invested $10K, they would see a nearly $150K return within a year. Now, in the wake the Emergency Cease and Desist order issued by Texas against BTCRUSH, the company announced that it has stopped accepting investments from anyone in the US.
Another enterprise, Forex EA and Bitcoin Investment, is also the subject of an emergency order. It has been telling investors that if they invest $5K, they will get back $50K in three weeks. The company, however, has not disclosed its trading strategy or told investors about the risks involved.
Commissioner Iles has also entered an Emergency and Desist Order against Wind Wide Coin Inc., which is located in Houston. The company is barred from fraudulently offering investments in a cryptocurrency trading program involving an automatic trading bot. Investors were purportedly promised that they could make fast returns of up to 900% with no risks involved.
Also, the state of Texas is accusing Wind Wide Coin of misleading prospective investors by representing the company as “legally registered” and “licensed.” Although located in Texas, Wind Wide Coin is not registered to sell securities in the state.
Enforcement Report: Widespread Fraud Found in Cryptocurrency Offerings, Texas State Securities Board, May 21, 2018