Texas has been one of the more active US states in combating fraudulent ICOs and cryptocurrency scams. Earlier this week it took three separate actions.
According to the Emergency Cease and Desist Order, Coins Miner Investment Ltd. manipulates its email solicitations to make them appear as if they came from Coinbase, a well-known San Francisco-based online cryptocurrency platform. Ana Julia Lara, a person affiliated with Coins Miner, falsely claims to work at Coinbase as a cryptocurrency trader. Coins Miner’s website makes numerous fraudulent misrepresentations to try to make its investment offering appear legitimate. The company claims it is based in the United Kingdom, but it operates in the Russian city of Volgograd. Coins Miner also misappropriated a video of a Fortune journalist to promote its offering. The video on the Coins Miner site shows the journalist discussing cryptocurrencies next to a superimposed Coins Miner logo but neither the journalist nor Fortune authorized the use of the video. The Coins Miner investments are securities under Texas law, but the offerings are not registered for sale in Texas, nor is Coins Miner nor Lara registered to sell securities.
The second action concerned DGBK Ltd., also known as DigitalBank, a Belize-based company that says it is developing a hack-proof device to store and transfer cryptocurrencies. According to the Emergency Cease and Desist Order, DigitalBank is soliciting funds to develop a digital wallet for cryptocurrencies that can be opened using a person’s biometric data. The company is offering prospective investors both shares in the company and the opportunity to buy its own virtual currency, a digital token called DGBK. According to the company, investors who purchase the token now can earn a return of 1,900% once it is sold in an initial coin offering next year. The company says it employs cybersecurity experts, blockchain and encryption engineers, and has the support of a major financial institution, but it is not naming or providing the background of most of them. The investments DigitalBank is offering are securities regulated by Texas law, according to the order, but neither the company nor the principals named in the order are registered to sell securities in Texas.
The third action concerned Ultimate Assets, which lists an address in Arlington, Mass. It is publishing online advertisements soliciting Texas residents for its cryptocurrency and foreign exchange trading program. According to Emergency Cease and Desist Order, its scam is as follows. Ultimate Assets is telling potential investors that an initial investment of $1,000 will turn into $10,000 in three weeks and that an initial investment in the trading program is fully guaranteed. Its investment contract says, “a refund will be issued in cases where [the] investment could not yield profits.” The investments being offered are securities under Texas law but the individuals named in the order, are violating the Texas Securities Act by offering securities investments without being registered with the Securities Commissioner. Indeed, Ultimate Assets itself appears to be a phantom entity. It is not located at the address listed on its investment contract and the state of Massachusetts has no record of corporate filings by Ultimate Assets.