Cease and Desist ordered against Florida-based cryptocurrency firm
DENVER — Colorado Securities Commissioner Gerald Rome issued a cease and desist order to Florida based Linda Healthcare Corporation and founder Arturo Devesa, reaffirming a decision by Administrative Law Judge Matthew Norwood that the initial coin offering (ICO) accessible online by Coloradans does, in fact, constitute a securities offering.
The Division of Securities, part of the Department of Regulatory Agencies (DORA), investigated Linda Healthcare Corporation and the Commissioner issued an order to show cause in May, resulting in the decision by Judge Norwood and subsequent cease and desist order.
“ICOs are highly risky and should only be undertaken by sophisticated investors with the understanding that they may lose most or all of their funds,” stated Commissioner Rome. “Most ICOs meet the terms of a securities transaction and carry with them all of the same risks when it comes to losing money.”
In April, staff with the Division of Securities became of aware of the website https://linda.healthcare/ that allegedly promotes an ICO for a cryptocurrency listed as “Linda Health Coin” (LNDA). The website includes instructions on how to participate, details the type of information required to buy LNDA, and how to pay for them.
According to the website, LNDA can be used to purchase specific “Linda Health Insurance” covering telemedicine through an artificial intelligence chat service that creates medical solutions through use of blockchain technology. Potential buyers of LNDA coin are not provided disclosures of the risks of investing in cryptocurrency and a pop-up that states that this particular ICO constitutes a security in the state of Colorado can be closed and easily ignored.
Despite the Respondent’s contention that the offering is closer to a crowdfunding campaign such as Kickstarter rather than a profit-sharing or equity offering, Judge Norwood sided with Commissioner Rome in finding that the offering being promoted by the website, and detailed in a white paper produced by Mr. Devesa falls under the terms of an “investment contract.”
“Investment opportunities being sold through ICOs over the internet need to be approached with the same level of caution as any high risk investment venture,” stated Rome. “If you are investing money in any kind of cryptocurrency, such as a coin or token where you are expecting to reap returns and are relying on those returns to come from the efforts of an outside party, you are dealing with investments.”
The order signed by Rome requires that Respondents immediately cease violations of the Colorado Securities Act as they pertain to the Linda Healthcare ICO.
More information on Initial Coin Offerings and other investor advisories can be found on the Division of Securities website.