Texas State Securities Board this week finished its second regulatory crackdown
on cryptocurrency offerings with two emergency actions against businesses
claiming they have the expertise and financial strength to deliver
high-yielding, no-risk returns.
Commissioner Travis J. Iles said the orders conclude the agency’s second
regulatory sweep of suspect cryptocurrency-related offerings. The sweep started
in mid-June 2019 in response to the price of Bitcoin nearly tripling in the
prior three months.
Cease and Desist Orders entered Oct. 15 against:
PK Crypto Investment AKA PK-Crypto Investment; Peggy Kay
Brendan; and Janet A. Osborn
Crypto Miner Limited AKA Cyp Miner Limited AKA Cyp Miner
and Elizabeth Frazier
quickly learned that bad actors were continuing to capitalize on widespread
interest in cryptocurrencies despite fluctuations in their prices and market
value,” said Joe Rotunda, director of the Enforcement Division.
Enforcement Division’s first sweep of cryptocurrency investment offerings
started in December 2017, also in response to a sharp increase in the price of
December 2017, Commissioner Iles has entered 26 administrative orders against 79 individuals and
entities involved in cryptocurrency offerings.
Several actions resulted in the offer of rescission to Texas investors.
cases have become a staple of the agency’s enforcement work.
fiscal year 2019, which ended Aug. 31, 30% of the investigations opened by the
Enforcement Division involved cryptocurrency offerings.
two emergency cease and desist orders entered Oct. 15 cite offerings that are
littered with traits common to suspect cryptocurrency-related investments.
CLAIMS OF LEGITIMACY: PK Crypto claims it is?a
“private legal US registered asset-management investment company.”? According
to the order, the company is not registered either with Securities and Exchange
Commission or the?Texas State Securities Board and it is not registered with
the Texas Secretary of State to do business in the state.
company also claims the securities it issues trade on an over the counter
market under the symbol GBTC. That ticker, however,?belongs to an unrelated
to the order, PK Crypto is also attempting to boost its credibility by telling
investors it works with legal counsel and an accounting firm that audits its
annual financial statements.
the State Bar of Texas has no record of the named attorneys being licensed to
practice law in Texas. PK Crypto’s purported accounting firm does not have any
affiliation with the company.?
Cyp?Miner claims it is a fully licensed
company in the United Kingdom, but according to the order,
the?registrar of companies in the UK has no record?of the company.? A company
promoter, Elizabeth Frazier,? is described as an “expert Bitcoin miner,”
but Cyp Miner provides no information on her qualifications or
ONLINE MARKETING: Cyp?Miner is
advertising investments tied to cryptocurrency mining on?DealStream, an?online
marketplace with more than 500,000 members in 100
countries. DealStream facilitates the buying and selling of
businesses, real estate, oil and gas assets, and private
PK Crypto has a robust
social media campaign. It is advertising cryptocurrency investment plans
through Twitter, LinkedIn, Facebook, and YouTube videos.
NO PHYSICAL LOCATION: Many promoters of
suspect cryptocurrency offerings exist only on the internet.
PK Crypto lists offices in
London, Vienna, Jakarta, and the Shanghai province of China. The company says
its worldwide headquarters is in Waco, Texas.
to the order, the street address in Waco does not exist.
PRIVATE OFFERINGS EXEMPT FROM
REGISTRATION: Cyp?Miner is
attempting to deceive potential investors by claiming the investments are
exempt from regulation, according to the order.?Cyp?Miner claims
its investments are “private transactions” and exempt from federal
securities laws and regulations.
order, however, found that Cyp Miner was violating state registration laws,
meaning the business was not exempt from state law.
INVEST MORE, EARN MORE: PK Crypto advertises that
an initial investment of $2,500 to $4,999 can produce daily
interest of 3.33% with a term of 30 days. Invest between $50,000 and
$100,000 in the VIP Plan and earn daily interest of 14.28% with a term of seven
PK Crypto is not providing any financial
information to potential investors so they can investigate the claims of
Investors must pay for the?investments?with
Bitcoin, one of the most widely used cryptocurrencies.
RECRUITING UNLICENSED SALES AGENTS: According to the
order, Cyp Miner is recruiting existing investors to act as sales
agents in bringing in new investors. The company is paying commissions of
between 1% and 10% of the principal deposited by new investors.
is not verifying that the affiliates are registered to offer or sell
securities, according to the order. Selling securities without being registered
generally violates the Texas Securities Act.
NO DISCLOSURE OF RISKS: Investments tied to
cryptocurrencies face a long line of risks, but according to both orders
risk disclosures are absent from the solicitations of investors.
include: Government regulation, volatility in cryptocurrency prices, hacking,
competition with all other cryptocurrencies, and disruptions in the exchanges
where cryptocurrencies are exchanged for fiat currencies like the U.S. dollar.