The North Dakota (ND) Securities Department issued cease-and-desist orders against three groups launching initial coin offerings (ICOs) in the state, including the infamous BitConnect, according to a press release.
The regulatory action is part of the continent-wide Operation Cryptosweep, that seeks to shut down cryptocurrency-related scams. “The expanding exploitation of the cryptocurrency ecosystem by financial criminals is a significant threat to Main Street investors,” ND Commissioner Karen Tyler said, adding that “financial criminals are cashing in on the hype and excitement around blockchain, crypto assets, and ICOs – investors should be exceedingly cautious when considering a related investment.”
According to the North Dakota regulator, the most common securities violations for ICOs were failure to register tokens and coins offered to the public, failure to register as a sales agent, and outright fraud.
BitConnect and related companies BitConnect LTD and BitConnect International PLC have also been served cease-and-desist orders in other states, namely Colorado, North Carolina and Texas. “BitConnect is not registered in North Dakota to offer securities and BitConnect’s claim of excessive interest rates is unsubstantiated and misleading,” the regulator said, in reference to the 120% returns promised to investors.
Magma, along with Magma Foundation and Magma Coin, which is selling a token named ‘MGM’ is supposedly “backed by gold and/or ETFs,” and was said to have false information on their website, “including images of people represented to be the Magma Foundation executive team, which in fact are not related to Magma and are assigned fake names.”
The third group, Pension Rewards Platform, was criticized by the agency for not disclosing “material financial and risk information to potential investors, nor do they describe the means by which they will provide the promised return on investments.”
The ND Securities Department said that a “red flag” of fraudulent ICOs was “plagiarized white papers containing spelling and translation errors, fictitious executive teams represented by stock internet photos, fake business addresses and phone numbers, fake celebrity endorsements, the promise of no risk and high returns, false claims about securities law compliance, and the promise of additional ICO tokens for promoting the deal and bringing in other investors.”
BitConnect shut down its exchange last January, the price of its cryptocurrency falling from a peak of over $400 a coin to a few cents today, in the few exchanges still trading it. The firm’s assets in the US have been frozen, and its executives are being hunted by the authorities. Divyesh Darji, who reportedly headed BitConnect India, was arrested in August.
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