Cryptocurrency Company LevelNet Hit With Cease And Desist Order In Vermontbr>
The Vermont Department of Financial Regulation has issued a cease and desist order against cryptocurrency startup LevelNet for violations related to the Vermont Uniform Securities Act.
According to the order, LevelNet is conducting an initial coin offering (ICO) seeking to raise money from investors across the country in exchange for their newly created cryptocurrency. The department’s investigation determined LevelNet is violating Vermont law by deceptively advertising unfounded and unrealistic investment returns and failing to properly register the investment. The department ordered LevelNet to immediately stop advertising and selling in the state.
LevelNet is developing a “decentralized antivirus platform” to be shared by members of its network. According to its website, the LVL token will give its holders several advantages, such as the possibility to access LevelNet services and all its products. The company also claims that investors could see a 20-fold return on their money in four to five years. Approximately $752,000 has been raised thus far during the ICO.
“We’re looking for the advertisement to be truthful and not to be overly sales-y,” said Michael Pieciak, the state’s Financial Regulation commissioner. “You’re giving someone honest information that is not designed to mislead or deceive. You’re not convincing someone they can make a quick dollar. Those are usually red flags.”
In a statement, LevelNet said it has “discontinued all sales and promotional efforts related to crypto token offerings” in the US. It added that the company “spent a lot of time” trying to meet US regulatory and legal requirements, but is now “forced to exit” the US market.
“As of September 2017, the financial regulator has consistently increased procedural complexity around (initial coin offerings) and has issued continuous amendments introducing new limitations,” LevelNet said. “We consider the requirement to register tokens as securities, whereas they are not listed on crypto exchanges, to be preposterous and detrimental to the development opportunities of technology startups.”
The department said the action was part of the North American Securities Administrators Association (NASAA) coordinated series of enforcement actions by state regulators to crack down on fraudulent crypto-related investment schemes. Regulators from 40 jurisdictions through North America, including Vermont, participated in Operation Cryptosweep, which, to date, has resulted in nearly 70 inquiries and investigations and 35 pending or completed enforcement actions since the beginning of May.
“The rapid rise of bitcoin has made Main Street investors aware and interested in cryptocurrencies and ICOs,” said Pieciak. “Although many are legitimate offerings that are fully compliant with law – many are not – and this order serves as a good reminder to exercise caution when considering investing in these products.”