The Attorney General of South Carolina has slapped Genesis Mining, one of the world’s largest cloud-based cryptocurrency mining firms, with a cease-and-desist order.
The order, issued on the 9th of March, mentions the names of two firms – Genesis Mining and Swiss Gold Global Inc. It asks both of them to cease all operations within the borders of the state.
According to the order, South Carolina considers mining contracts to be securities, which makes it illegal to sell them to state residents without proper authorization.
The Securities Commission of South Carolina alleged that Swiss Gold Global was acting as a broker and selling mining contracts for Genesis, without registering in the state to offer securities.
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An excerpt from order noted: “At all times relevant to this order, Respondent Genesis Mining continuously offered investment opportunities in Mining Contracts to South Carolina residents through its website. At no time relevant to the events stated herein was Respondent Swiss Gold Global registered with the Division as a broker-dealer, and no exemption from registration has been claimed by Respondent Swiss Gold Global.”
Genesis Mining currently offers cloud mining service of six cryptocurrencies – Bitcoin, Dash, Ethereum, Litecoin, Monero, and Zcash – to its clients. Through the mining contracts, customers lease a certain amount of computing power for a specific period to mine the cryptocurrency of their choice from the list in a cloud-based platform. This gives customers a hassle-free way to mine cryptocurrencies without maintaining any hardware.
However, in the commission’s view, the agreements between Genesis and its clients “constitute investment contracts and are thus securities” under South Carolina law.
Moreover, the authority barred both firms from doing business in South Carolina at any time in the future. The companies can now appeal for a hearing against the order.
Meanwhile, a few days ago, the New Jersey state authority issued cease-and-desist order against a blockchain firm endorsed by the famous actor Steven Seagal, also accusing the firm of selling unregistered securities to state residents.