The Vermont Department of Financial Regulation issued a cease-and-desist order to crypto startup LevelNet over suspicion of violating Vermont's Uniform Securities Act.
LevelNet bills itself as an informational security network hoping to develop a platform that "enables participants to share threat data globally and in real time, allowing for the entire system to become much smarter, much faster, than any single security cybersecurity provider can today."
On Monday, the department issued a formal press release stating that the company's initial coin offering, which had yet to be concluded, violated Vermont law by "deceptively advertising unfounded and unrealistic investment returns and failing to properly register the investment."
LevelNet, which is based in California, was ordered to immediately stop all advertisements and sales of the LevelNet token, LVL, in Vermont.
When speaking about the investigation, Commissioner Michael Pieciak stated:
"Although many are legitimate offerings that are fully compliant with [the] law – many are not – and this order serves as a good reminder to exercise caution when considering investing in these products."
The cease-and-desist letter is part of "Operation Cryptosweep," an ongoing effort by the North American Securities Administrators Association (NASAA) to crack down on cryptocurrency companies that mislead investors by exaggerating the value of their tokens and how much return investors can expect on their investments.
In January of this year, the department issued a warning to cryptocurrency investors cautioning them to be wary of companies that make claims that sound too good to be true, stating:
"Cryptocurrencies may be a high-risk product with an unproven track record and high price volatility, and when combined with a high risk of fraud, investing in cryptocurrencies is not for the faint of heart."
The order from the Vermont Department of Financial Regulation can be viewed below: