Texas Securities Commission Issues Cease-and-Desist Orders Against Three Crypto Firms

Crime, News | September 20, 2018 By:

The Texas Securities Commission (TSC) has taken emergency action to stop the fraudulent offerings of investments in three separate schemes involving cryptocurrencies.

On Tuesday, TSC Commissioner Travis J. Iles entered separate emergency cease and desist orders against Coins Miner Investment Ltd., a crypto investment promoter operating in Russia, DGBK Ltd., an offshore digital bank that claims it has developed hack-proof storage for virtual currencies, and Ultimate Assets, a purported crypto and foreign exchange trader.

Coins Miner Investment Ltd.

Coins Miner is allegedly soliciting funds from Texas residents by pretending to represent Coinbase, a San Francisco-based crypto exchange. According to the cease-and-desist, Coins Miner is manipulating its email solicitations to make them appear as if they were issued by the San Francisco-based exchange. the TSC said Ana Julia Lara, an affiliate of Coins Minter who crafted the fake email, falsely claims to work at Coinbase as a cryptocurrency trader.

“Lara is also sending prospective investors a photograph of herself with the president of Ripple, a cryptocurrency and transaction company, but the person identified as Lara is a vice president of CoinTelegraph Media Group,” the TSC said.

Coins Miner, based out of Volgograd, Russia, is also under investigation for using a false UK address. It is further charged with publishing a stock video footage that purports to shows its “expert team” of technical and financial professionals, its office, and its computer hardware.

“The Coins Miner investments are securities under Texas law, but the offerings are not registered for sale in Texas and neither Coins Miner nor Lara are registered to sell securities,” the TSC said.

DGBK Ltd.

Based in Belize, DGBK claims that it is building a hack-proof custody solution for digital assets called “Photon Encrypted Ledger Key,” and is soliciting funds to develop this concept. According to the order, the company told likely investors to purchase DGBK at a price of $0.50 and sell it for $10.00 during the token sale. DGBK is also accused of using a 33-second video of Barack Obama, taken at the 2016 South by Southwest interactive festival in Austin, to promote itself.

“In the video, President Obama generally discusses advances in technology and encryption that may allow the creation of impenetrable devices and systems,” the order said. “DigitalBank is telling investors to view the video to try to understand what Obama in 2016 already understood about the company. The company embedded the video throughout its website, on social media, and in correspondence to investors.”

However, DGBK is not informing prospective investors about its technical expertise or financial support. It claims to employ cybersecurity experts, blockchain and encryption engineers, and has the support of a major financial institution, but it is not naming or providing the background of most of them. For that reason, the TSC concluded that the offering was deceptive.

“DigitalBank and two of its principals are telling potential investors that they can participate in a “bounty program” that permits them to earn compensation for referring new investors to the company,” the order said. “But the company is not disclosing that participating in such a program requires a person to be registered to sell securities.”

Ultimate Assets LLC

Ultimate Assets claims to be based in Arlington, Massachusetts, and is promising investors that an initial investment of $1,000 will turn into $10,000 in three weeks. It also claims that an initial investment in the trading program is fully guaranteed and “a refund will be issued in cases where [the] investment could not yield profits.” According to the cease and desist order, the investments being offered are securities under Texas law.

In addition to violating the Texas Securities Act by offering securities investments without being registered with the Securities Commissioner, Daniel Dishmon and John Jason Woodard, the principals listed in the order, are also accused of engaging in fraud by failing to inform investors of the regulatory, market, and technical risks in the trading of cryptocurrencies and foreign currencies.