Meet Texas SSB Director of Enforcement Who Blew the Horn on BitConnect Crypto Scam
Every industry has its own Al Capone; and needs their “the untouchables” to clean up and make it safe. The blockchain and the crypto industry is no different. This is where the Director of Enforcement at the Texas State Securities Board, Joseph Rotunda comes in.
With a background in securities regulation and felony prosecution; Joseph has seen it all from burglary to tampering with governmental records.For the last decade, the veteran lawyer has led a team of 30 attorneys and financial examiners at the division.In fact, he has already cleaned up some of crypto’s most suspect investment schemes in his state.He has overseen hundreds of investigations into crypto offerings since 2017. His teams claim to fame was the state-wide sweep against dodgy cryptos that led to a cease-and-desist order against BitConnect.
Texas, home to about 28 million citizens, has its share of scam artists and white-collar criminals: people who prey on senior citizens and others alike; especially with the opportunity afforded by investment schemes. And the division head, with all his experience, is well aware of how to deal with these dubious individuals. His team was hardly caught off guard when dealing with cryptocurrency. Even though the technology was new and didn't quite adhere to the rules of capital flow, he says“We quickly recognized these bad actors would attempt to capitalize on the sharp increase in both the price of Bitcoin and the market capitalization of cryptocurrencies to attempt to defraud our constituents.”
In a move not out of place in a hollywood western, his team responded quickly. By December 2017, they had rounded up rounded up a staggering number of “companies” using cryptocurrency to defraud and deceive the locals. This included BitConnect, the now defunct cryptocurrency scheme.
Using other movie troupes his team used stealth, undercover tactics and coordination with other state and federal agencies to nab BitConnect. Using these tactics and more: blockchain transaction records, criminal histories and regulatory reports, he went on to add “We need to identify and uncover fraudulent schemes before they collapse, because the collapse of these schemes generally leads to victims losing the entirety of their principal.
Undercover investigations, coupled with traditional investigative tactics, often allow us to accomplish this goal in a relatively short period of time.” His ways have seen successful charges being laid against more than 30 defendants;some for traditional securities but many more involving cryptocurrencies.
And yet, when asked about initial coin offerings or tokenized securities, the top man of the securities board was quick to note them as “fresh ideas and exciting plans”. He does suggest being cautious and working with “competent counsel” to work within the highly regulated world of US securities law.
“It is not as simple as considering stock issuances or bond offerings, which are defined by statute to constitute regulated securities transactions. Instead, based on individual facts and circumstances, regulators need to consider whether security token offerings constitute an investment contract, evidence of indebtedness, or some other type of instrument regulated as a security.”
He thus sees both security token offerings and other cryptocurrencies may be considered regulated securities. Again, he feels, the cryptocurrency community will need to work patiently and closely with regulators to protect the public better.