Texas Watchdog Strikes 16 Crypto Scams with Enforcement Orders

Texas watchdog entered 16 administrative orders involving a total of 60 individuals and entities.

An annual report by the Texas State Securities Board shows how cryptocurrency activities, which did not merit a mention a few years ago, were among the watchdog’s top priorities in 2018. Crypto-related scams have even surpassed those involving traditional asset classes such as stocks, futures, etc.

The TSSB’s enforcement report for 2018 revealed a total of $13.2 million in civil monetary penalties. With specific regard to cryptocurrencies, Texas watchdog entered 16 administrative orders involving a total of 60 individuals and entities.

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The TSSB was apparently focused in particular on the ICOs campaigns, which involve the sale of digital tokens related to blockchain projects. This was highlighted by the agency’s flagship case against BitConnect, a folded ICO project that has been accused of scamming millions out of investors.

“The emergency action effectively shut down the scam, as BitConnect almost immediately lost 99% of its market capitalization of $2.6 billion,” the state regulator said.

The TSSB also notes that while many of its probes have turned on fraud, it is also pursuing cases to ensure compliance with the registration requirements of the federal securities laws.

“None of the individuals or firms were registered to sell securities in Texas,” it added.

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Texas’ watchdog is one of the most active state regulators in the crypto arena, joining federal authorities in going after businesses trying to avoid proper registrations.

More recently, the agency also warned Texans about persons that approach victims of the now-defunct pyramid scheme BitConnect claiming that, for a $250 fee, they can help them recover their investments.

The fake notice, which is labeled “Bitconnect update,” claims that the agency has promised to refund 35 percent of a “participant’s investment” in BitConnect.

BitConnect itself received two cease-and-desist letters from state authorities after the self-described “self-regulating financial system” used celebrities to promote its scam. Divyesh Darji, the Indian head of BitConnect and believed to be a core promoter of the scheme, was arrested in August.

The annual report also called attention to several recent enforcement actions, including those involving hybrid fraudulent schemes.

“Some international cryptocurrency promoters even found sales agents in the oil patch. According to a Nov. 6 emergency action taken against an Australian promoter of cryptocurrency mining contracts, the firm’s sales agents included members of the West Texas Oilfield Cloud Miners Club in Midland,” the report concludes.

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