Securities commissioner of North Dakota has issued orders against three companies allegedly promoting fraudulent ICOs.
Three Illegal ICOs Identified
Karen Tyler, North Dakota Securities Commissioner, has issued cease and desist orders against three firms promoting fraudulent and unregistered securities in the garb of ICOs (Initial Coin Offerings). The information was communicated through a news release on the official government website earlier on Thursday.
The three companies have been identified as Crystal Token, Advertiza Holdings (Pty) Ltd., and Life Cross Coin a/k/a LifecrosscoinGmbH.
To safeguard the interest of the investors of the state, the Commissioner has constituted an ICO task force asking it to identify the ICOs and cryptocurrencies that pose a risk. The three firms have been found non-compliant during ongoing investigations.
Crackdown on ICOs Continues
According to the news release:
The effort is also part of Operation Cryptosweep, a coordinated multi-jurisdiction investigation, and enforcement effort involving over 40 U.S. and Canadian securities regulators.
Last month the agency had issued orders against BitConnect, Magma Foundation, and Pension Rewards Platform.
“The continued exploitation of the cryptocurrency ecosystem by financial criminals is a significant threat to Main Street investors,” said Tyler. “In formulaic fashion, financial criminals are cashing in on the hype and excitement around blockchain, crypto assets, and ICOs – investors should be exceedingly cautious when considering a related investment.”
Common red flags of fraudulent ICOs include:
- Plagiarized white papers containing spelling and translation errors
- Fictitious executive teams represented by stock internet photos
- Fake business addresses and phone numbers
- Fake celebrity endorsements
- The promise of no risk and high returns
- False claims about securities law compliance
- The promise of additional ICO tokens for promoting the deal and bringing in other investors
Issues Identified with the Three ICOs
Crystal token (CYL) promised its investors a daily return of up to 2%. The firm’s website allegedly contains, “Fraudulent statements with claims of excessive unsubstantiated rates of return on investment, fails to provide sufficient disclosure of the management team’s credentials, and purposely withholds their identities.”
Advertiza Holdings was soliciting investors through their website and offering a token called Tizacoin (TIZA). Statements on the website claim that holders of the coin can earn through the appreciation in the value of the asset. The news release further states, “Advertiza falsely claims it has made a filing with the SEC under federal Rule 506c of Regulation D. The company is not registered in North Dakota to offer securities.”
Life Cross Coin or LICO as it is called has a website registered in Berlin and the IP address used is associated with ransomware, trojans, and identity fraud. The release says:
The website contains allegedly fraudulent content including the people represented to be the executive team, who all appear to have fake names. Life Cross Coin is not registered in North Dakota to offer securities, and their website content contains unsubstantiated claims and misrepresentations.
Fraudulent ICOs like the ones identified continue to plague the developing blockchain and cryptocurrency eco-system. In the absence of clear regulations and cybercrime laws, innocent investors are being victimized across the globe. A coordinated global effort towards combatting this growing menace is called for.
What do you think should governments and regulators do to protect the investors from fraudulent ICOs and cryptocurrencies? Let us know in the comments below.
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