The Securities Commissioner of the state of Texas filed an emergency cease and desist order for BitConnect late Thursday evening. In the official report, the Texas State Securities board accuses the London-based investment platform of fraud and the selling of unlicensed securities.
BitConnect in Hot Water
Throughout the write-up, the state of Texas lists a number of details surrounding the BitConnect investment model, including its rate of return, lending program, and staking program.
These findings, the Commissioner holds, meet all the criteria for a traditional security, and as such, BitConnect is currently selling its assets illegally:
“Respondent BitConnect is violating Section 7 of the Texas Securities Act by offering securities for sale in Texas at a time when the securities are not registered with the Securities Commissioner.”
The report also found that BitConnect is engaging in fraud for failing to reveal the “identity of its principals” and “the source of funds that will be used to pay investors interest at a rate of 120% per year,” among other obscurities. Further, the order condemns BitConnect for its “materially misleading and deceptive statements” that market the platform as a safe and risk-free option for high return investments.
In response to these findings, the Commissioner concludes the report by ordering BitConnect to suspend its operations within the state:
“It is therefore ORDERED that Respondent BitConnect immediately CEASE and DESIST from offering for sale any security in Texas until the security is registered with the Securities Commissioner or is offered for sale pursuant to an exemption from registration under the Texas Securities Act.”
The orders continue to demand that BitConnect cease from engaging in fraud or publicizing misleading statements related to its securities.
Regulators Corroborate Community Suspicions
Some members of the crypto community have long been suspicious of BitConnect and its low-risk, high-return promise. From the outside looking in, it appears downright suspect, and many have labelled it as an outright scam.
These naysayers include such prominent figures as Ethereum founder Vitalik Buterin and Litecoin founder Charlie Lee. Back in November, both community mouthpieces spoke out against the platform, coming to a consensus that it operates like a textbook ponzi scheme.
Texas’ cease and desist order certainly lends credence to these claims, as an official accusation of fraud from a governing authority will be hard for BitConnect to shake. Still, the report did not provide any details about how Texas officials plan to effect the orders, and it remains to be seen whether or not they will be able to effectively regulate the buying and selling of BitConnect within the state.
Featured image from Shutterstock.
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