Texas Securities Regulator Orders BitConnect To Stop Allegedly Fraudulent Sales of Unregistered Bitcoin Investments

In an Emergency Cease and Desist Order, the Texas State Securities Commissioner is demanding that BitConnect, which is based in the UK, stop a number of its investment programs, as well as its allegedly fraudulent sales of Bitcoin investments. According to the regulator, BitConnect sales agents are targeting prospective Texan investors, as well as investors in other parts of the US.

BitConnect issues its own currency, known as BitConnect Coins. As of earlier this month, the company was claiming that its market share for its cryptocurrency coins was $4.1B. It announced plans to issue up to 28 million coins.

According to the regulator’s order, BitConnect’s website BitConnect is an “open sourced, all-in-one Bitcoin and crypto-currency platform” that offers different investment opportunities. The site depicts BitConnect Coins as an “open source, peer-to-peer community-driven decentralized cryptocurrency” with which owners can “store and invest their wealth.”

To invest in the different BitConnect programs, individuals have to use Bitcoin. For example, in the BitCoin Lending Program, investors have to buy BitConnect Coins through a BitConnect Trading Bot to make up to 40% in returns a month.

BitConnect Investments are Unregistered Securities
The Texas Securities Commissioner, however, is reporting that even though BitConnect investments are securities, they are not registered as such in the state even though that is a requirement. Also, BitConnect is not registered to sell securities in Texas.

The press release issued by the Texas regulator noted that BitConnect has disclosed “virtually nothing,” about its financial state, its executives and principals, geographic location, assets and liabilities, or “strategies” for making investors money. Still, the company claims that its investments are ‘safe” and investors can make high returns.

BitConnect also reportedly runs websites and advertises online to hire “affiliates,” that serve as sales agents. The company gives affiliates the marketing collateral they need to solicit investors. The sales agents are paid commissions when they bring in investors to the BitConnect program.

The Texas Securities Commission said that BitConnect is pursuing investors through social media, Craigslist, and other online outlets. Their sales agents,however, are not registered in Texas to sell securities as representatives of BitConnect.

The company’s websites purportedly offer investors the chance to “safely” make up to 120% in interest for getting involved in the BitConnect Staking program. The BitConnect site claims that investors can experience “quick profit growth” that can ensure not just their future but their “financial freedom” if they invest.

The Texas securities regulator is claiming fraud and “materially misleading and deceptive statements and representations” on the part of BitConnect. For example, claims the state, BitConnect makes it appear as if current investors will be paid commissions for referring new investors, which is a “materially misleading” claim. In Texas, anyone who offers and sells securities, including BitConnect-related investments, has to be registered with the state or exempt from said registration.

Meantime, BitConnect announced that it plans to offer an Initial Coin Offering in the United States later this month. With an initial coin offering, companies hold token sales to raise money from investors.

Texas Securities Fraud
In Texas, our Houston securities fraud lawyers represents investors that have lost money because of investor fraud. If you have lost money from investing in an unregistered security or because misrepresentations and false promises were made to you about your investment, Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Read the Emergency Cease and Desist Order (PDF)

More Blog Posts:
Houston Technology Company is Accused of $28M Texas Securities Fraud, Stockbroker Fraud Blog, December 26, 2017

FINRA Warns About Cryptocurrency Related-Fraud, Stockbroker Fraud Blog, December 22, 2017

Royal Bank of Scotland Settles Mortgage-Backed Securities Fraud Case Brought by Pension Funds for $125M, Institutional Investor Securities Blog, December 29, 2017