Texas State Securities Board Hits Bitcoin Mining Investment Platform With Emergency Cease and Desist Order
USI-Tech Limited, an Dubai-based purveyor of Bitcoin mining investment contracts, was issued with an Emergency Cease and Desist Order by Texas Securities Commissioner, Travis J. Iles. The firm is promising low-risk, triple-digit returns from investments tied to Bitcoin which it claims is not contingent on the valuation of Bitcoin itself.
The Texas State Securities Board's enforcement staff presented their evidence to the Securities Commissioner that USI-Tech and two of its sales agents based in USA have been soliciting investors across the state through various online channels such as Craigslist, Youtube and numerous websites.
The two sales agents have been identified as Clifford Thomas of Suitland, Maryland and Michael Rivera of Los Angeles, California. Neither the sales agents nor the investment platform are registered to sell securities in Texas per Section 23-2 of The Securities Act.
USI-Tech and the US-based agents are offering for sale an investment contract in the mining of bitcoin. No information is available on the location of mining operations or whether any actual mining takes place at all.
According to the agents' websites “the mining investment derives its value from USI-Tech’s non-exclusive interest in a series of Bitcoin mining contracts.” The investment contracts promise a guaranteed daily return of 1%.
Whereas the USI-Tech website claims that its Bitcoin platform “consistently provides returns of up to 150% per year” and that the returns are not contingent on valuation of Bitcoin. Both USI-Tech and the agents have been advising prospective investors on the platform that the mining contract is “a certified legal product in the USA per the FTC.”
In addition,The sales agents have also been attempting to deceive investors by claiming that USI-Tech has a “binding legal opinion” from a law firm stating the company is “a legal business in good standing.” The platform is also promoting a “unique referral marketing plan” which promises investors “up to 35% commissions” through referrals.
The Texas State Securities Board requires individuals being paid such commissions to be registered with the Board or qualify for an exemption from registration.
Law of the Land
The FTC (Federal Trade Commission) is not responsible for regulating registration of investment contracts as a security in the state of Texas. Such contracts are regulated by the Texas State Securities Broad including the registration of dealers and agents offering and selling the product, and full disclosure of material facts pertaining to a contract to investors.
The violations delineated by Texas State Securities Board include offering securities for sale which are not registered with the Securities Commissioner, engaging in fraud in connection with the offer for sale of securities, making offers containing statements materially misleading or likely to deceive the public and conduct, acts and practices which threaten immediate and irreparable public harm.
The Board therefore has ordered USI-Tech and the sales agents to cease and desist from offering securities for sale until registered and ratified by the Securities Commissioner and from engaging in fraud and promoting materially misleading investment contracts.
Violation of the order constitutes a criminal offence punishable by a fine of 5000 USD and/or imprisonment of upto 2 years.
The Texas State Securities Board's Cease and Desist order can be found here