The Texas State Securities Board has reached an agreement with four cryptocurrency-related companies after filing an emergency cease and desist order in July 2018 claiming they offered investments in securities that were not registered in Texas. The companies have agreed to pay a $25,000 administrative fine and halt operations in Texas until the securities are registered with the Securities Commissioner.
The four companies involved in the agreement are Mintage Mining, BC Holdings and Investments, Social Membership Network Holding, and NUI Social. The document also names Darren Olayan, who, according to the original cease and desist order, controls Mintage Mining and NUI Social.
According to the agreement, Mintage Mining, BC Holdings and Investments, and NUI Social were offering investment opportunities in their "Hash Rate Unit Investment Program" and "Open-Ended Unit Investment Program." Both programs were tied to crypto mining units, allowing investors to purchase the mining equipment and earn a share of the net mining revenue, minus hosting and management fees. Neither program was registered with the Securities Commissioner and were therefore not permitted to be sold in Texas.
The document also claims Mintage Mining, Social Membership Network Holding, NUI Social, and Olayan were recruiting individuals to act as sales agents in Texas without first verifying that those individuals were registered as dealers or agents with the Securities Commissioner. Not only were the recruits unregistered, Olayan and the four companies were also acting as unregistered dealers and agents.
The Texas State Securities Board has had a busy 2018 investigating cryptocurrency-related companies for possible fraud. In April 2018, ETHNews spoke with Joe Rotunda, director of the Board's Enforcement Division which published a report detailing 32 investigations into promoters of crypto investments, none of whom were registered to sell securities in Texas. Rotunda found that, while plenty of businesses are working to develop legitimate crypto investments, promoters of fraudulent schemes were capitalizing on the technology's hype.
More recently, on February 7, the Board published its 2018 Enforcement Report which stated that, in 2018, Securities Commissioner Travis J. Illes "entered 16 administrative orders against promoters of suspect cryptocurrency investments who were using online advertisements, social media, and other solicitations to attract Texas investors." This included, of course, the emergency cease and desist order brought against BitConnect in January 2018.