Financial fraud is on the rise in the crypto world if a recent regulatory report is anything to go by. According to the Enforcement Division of the Texas State Security Board (TSSB), promoters of cryptocurrency investments appear to illegally and fraudulently attract Texas investors through online advertisements, social media, and other public solicitations.
Texas State Security Board Findings
The Division found that out of the 32 companies investigated by attorneys and investigators, 19 expectedly claimed they would use Bitcoin in one way or another either by trading it, accepting it as an investment or by investing it in bitcoin businesses, sites or technologies. Bitcoin is the most popular and widely known digital currency and online transaction system.
However, among the findings from the 32 investigations, TSSB discovered that none of the promoters were registered to sell securities in Texas, in complete violation of the Texas Securities Act. Seven of the investigated companies were offering securities relating to a new cryptocurrency. Popular among promoters was the use of social media, websites and online advertising to market to Texans with 30 companies on the list. This explains the influx of phishing sites and Ponzi scams.
In some instances, promoters guaranteed unprecedented returns, even as high as 40% per month in total disregard of investment risks. At least five of the investigated promoters offered false returns to act as bait to potential investors.
When it came to registration confirmation and company’s physical address, only eleven promoters provided their physical address to potential investors. Six out of the 32 companies investigated actively recruit sales agents without verification whether they are registered with the Securities Commissioner. Six of the promoters run affiliate programs offering payment of referral commissions to investors who recruit new investors into the scheme.
Some companies promised investors lucrative profits once the tokens which are newly minted virtual coins are introduced to the market. Some promoters even tied the coins to investment programs with some programs even involving lending the coins to earn future interest payments or staking.
The investigations revealed massive illegalities and irregularities relating to the offer and sale of cryptocurrency investment products and the Enforcement Division of TSSB and the Securities Commissioner have taken several actions against fraudulent cryptocurrency promoters and Ponzi scams. The goal is to empower Texans to help them identify legit securities offerings while avoiding investment opportunities they understand little about.
Investors are advised to always seek and go through a company’s whitepaper before putting their investments in the hands of promoters.