On February 26, 2018, the Securities Commissioner of the State of Texas, Travis J. Iles, signed and entered an emergency cease and desist order to LeadInvest, a suspicious cryptocurrency company with ties to Panama. At the time of writing, the company's website (leadinvest.net) redirects to bitcoinvest.de. It is unclear whether the companies are affiliated.
The cease-and-desist order does not mention a specific person or group of people responsible for LeadInvest's activities, which raises questions about the order's enforceability.
According to the document, the Texas State Securities Board (TSSB) found that the LeadInvest management team is fictitious. From blockchain advisors to smart contract designers, and from compliance attorneys to marketing staff, the executives are made-up. Headshots of supposed team members were lifted from other websites and names were changed. In most cases, the TSSB redacted the names of the actual people whose likenesses were misused.
It appears that LeadInvest also invented the McAllison Law Firm, using an image of members from a real law firm based in California. Furthermore, the LeadInvest website highlighted its "CodeofEthics [sic] Association," but the photograph purporting to show its members actually depicts Supreme Court Justice Ruth Bader Ginsburg gathered with former solicitor and deputy solicitor generals.
According to the TSSB, LeadInvest is offering a mining and fiat currency lending program. The website represents that investors can enjoy terrific profitability and earn high interest rates. The operation claims that users have created more than 190,000 accounts and that the company has more than $177 million in its coffers.
While LeadInvest has told investors that it intends to be fully compliant with relevant laws and regulations of the Cayman Islands, the TSSB called this statement "materially misleading or otherwise likely to deceive the public." Since the company is soliciting investors located in Texas, the Securities Board wrote that LeadInvest must comply with the Texas Securities Act. The supposed crypto company has also not identified the "fund directors" referenced in its statements.
Ultimately, the TSSB concluded that the LeadInvest cryptocurrency mining program and the LeadInvest Fiat Currency Lending Program are "securities," as defined by Section 4.A of the Securities Act. The agency found that LeadInvest is violating section 7 and section 12 of the act, and is "engaging in fraud in connection with the offer for sale of securities." The TSSB also asserted that the enterprise's conduct threatens "immediate and irreparable public harm," thereby justifying the issuance of the emergency cease-and-desist order.
ETHNews previously reported on the Texas State Securities Board's cease-and-desist orders issued to BitConnect and AriseBank. In the case of AriseBank, the US Securities and Exchange Commission also filed a complaint against the company.