A U.S. state has issued emergency cease and desist orders to two companies and related persons purportedly engaged in cryptocurrency investment schemes. The first company posted videos of three mining farms composed of online stock images, according to the order. Both companies made numerous materially misleading claims and violated U.S. securities laws.
Bitcoin Trading & Cloud Mining Limited
Texas State Securities Board.
The Texas State Securities Board has issued "an emergency cease and desist order" to London-based Bitcoin Trading & Cloud Mining Limited, also known as Btcrush. Also included in the order are the company's sole director and shareholder Jaylon Cross, founder and CEO Bruce Rodgerson, Chief Marketing Officer Robin Lozinski, and sales agent Thomas A. Johnson.
Btcrush is self-described on its website as "a cloud-based cryptocurrency mining company that mines bitcoin and altcoins and profits from selling altcoins for bitcoins." The company promises an investment return of 4.1% daily interest regardless of the profitability of its mining operations, adding that its main principle is a "100% satisfaction guarantee for [its] customers." The company claims:
A principal investment of $10,000.00 for a term of 365 days returns approximately $17.08 per hour, $410.00 per day and $149,650.00 per year.
In addition, the company has been recruiting investors as sales agents, promising them a commission of 15% of the principal deposited by the new investors that they recruit.
US State Issues Emergency Cease and Desist Orders to Two Crypto Investment Firms
Bogus Mining Farm Videos
According to the order, Btcrush had posted videos of its three mining farms on its website.
US State Issues Emergency Cease and Desist Orders to Two Crypto Investment FirmsThe first mining farm the company claims to operate is the Maverik Farm, which it describes as the "most powerful farm" located "in the mountains."
The second is the Hephaestus Farm, which Btcrush claims to be the "most reliable and secretive farm located in a bunker of the Second World War times."
The third is the Rebelpower Farm, located "at the former power station."
However, the Securities Commissioner wrote:
Although the Btcrush website represents these videos depict the Maverik Farm, the Hephaestus Farm and the Rebelpower Farm, they do not actually depict mining farms operated by respondent Btcrush. Instead, respondent Btcrush created these videos by manipulating stock footage available for sale on the internet.
Forex EA & Bitcoin Investment LLC
The second company to receive an emergency cease and desist order from the Texas State Securities Board on Tuesday is the New York-based Forex EA & Bitcoin Investment LLC, also known as My Forex EA. Also included in the order are James Butcher and Richard Dunn who market the company's Forex and Bitcoin trading program targeting Texas residents, the Securities Commissioner detailed. They advertise:
An investment of $500.00 in the Forex and Bitcoin trading program will return $5,000.00 in twenty-one calendar days…[and] an investment of $1,000.00 in the Forex and Bitcoin trading program will return $10,000.00 in twenty-one calendar days.
Similarly, an investment of $20,000 will yield $20,000 and $5,000 will yield 50,000 in the same time period, the order describes. They also claim that the investments involve "no risk" and their returns "are 100% assured and that there is no possible way investors can lose money."
Violating Securities Laws
The Texas State Securities Board's order explains that the investments both companies offer are securities and their sales are in violation of the Securities Act since neither the companies nor their agents have been registered with the state's Securities Commissioner.
US State Issues Emergency Cease and Desist Orders to Two Crypto Investment FirmsBtcrush also asks investors to agree to a "private transaction rule" of the US Securities Act of 1933 and related acts when signing up. "This statement is materially misleading," the order shows, adding that the public will likely be deceived into thinking that the company is offering regulated securities in the state.
Furthermore, Btcrush asks investors to agree at signup that they "are investing at their own risk" and that the company "reserves the right to amend…. fixed interest rates… without agreement with investors." The order says that these statements are also materially misleading given the advertised guarantee of 4.1% return regardless of the company's profitability.
