BitConnect has drawn the attention of regulators who want to stop it from soliciting cryptocurrency investment services to Texas residents.
On January 4, 2018, the Commissioner of the Texas State Securities Board filed an Emergency cease-and-desist order in an effort to put the brakes on investment programs offered by England-based cryptocurrency platform, BitConnect.
According to Securities Commissioner Travis J. Iles, who filed the order, BitConnect’s issuance of its own token, Bitconnect Coins, as well as other cryptocurrency-related investment services fall under the classification of securities. However, BitConnect failed to register as required under the Texas Securities Act and State Securities Board Rules and Regulations.
Although unregistered to sell securities in the state of Texas, the commission said sales agents for BitConnect targeted Texans via internet advertising, social media campaigns, and online marketplaces.
The regulatory actions come in response to BitConnect’s intentions to undergo a token offering-based crowdfunding initiative, or Initial Coin Offering (ICO).
BitConnect’s solicitation activities include claims that investors will receive annual returns in excess of 100 percent, according to the commissioner. In a publication on the board’s official site, a statement said:
“BitConnect has disclosed virtually nothing about its principals, financial condition, or strategies for earning profits for investors. It has not provided a physical address in England.
Despite providing no information on how it will make money for investors – including the algorithms behind the Trading Bot – BitConnect is touting its investments as a ‘safe way to earn a high rate of return.’
Investing in cryptocurrencies, however, carries significant risk because of regulatory and legal actions, competition from other cryptocurrencies, and the extreme volatility in the price of many cryptocurrencies.
The company operates websites and deploys online advertising to recruit sales agents, which it calls ‘affiliates.’ The company provides marketing material to affiliates, including online presentations, and pays them commissions for referrals that result in investments in BitConnect programs.”
The board may be challenged; Texas law does provide BitConnect an opportunity to contest the order at the State Office of Administrative Hearings.
Jeremy Nation is a writer living in Los Angeles with interests in technology, human rights, and cuisine. He is a full time staff writer for ETHNews and holds value in Ether.
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