Division of Securities issues orders to four companies promoting ICOs in Colorado
DENVER — Colorado Securities Commissioner Gerald Rome has signed four orders directing companies to show cause as to why a final cease and desist order should not be issued against them. The orders are the result of an investigation into potentially fraudulent securities offerings in Colorado in the form of Initial Coin Offerings, or ICOs. The investigation is being conducted by members of the Division of Securities, part of the Department of Regulatory Agencies (DORA), who are on an “ICO Task Force” convened by the Commissioner in May with the purpose of identifying companies that might pose a risk to Colorado investors. The four companies that received the orders are Bitcoin Investments Ltd. (also doing business as DB Capital), EstateX, Bitconnect Ltd., and Magma Foundation (also doing business as Magma Coin).
“Initial Coin Offerings are popular because of the excitement that is still circulating around cryptocurrency, blockchain, and other financial technologies,” stated Rome. “It is not our goal to penalize companies that are doing their best to follow the rules and regulations put in place, but due to the high level of fraudulent and spoofed ICO companies out there, we want to make sure people aren’t being taken advantage of by what’s been termed ‘crypto-criminals’.”
Bitcoin Investments Limited is a website accessible by Colorado residents that claims it is a “leading blockchain investment firm and one of the largest institutional owners of cryptocurrencies” and claims celebrity promotors such as NBA star Carmelo Anthony. Investigators noted, however, that the site used to promote the offering, https://double-btc.info is allegedly the exact format as the website www.Howeycoins.com, which is an educational website that the U.S. Securities & Exchange Commission set up to teach people about the red flags of fraudulent ICOs.
EstateX is operating online at the site www.estatex.net, promotes an ICO for a token named “STX” and claims to have a technology that uses the Ethereum blockchain to conduct real estate transactions. The website showcases the token sale, a whitepaper, technology, frequently asked questions, and lists Respondent Arthur Len, but has no other way of contacting or verifying the company except to subscribe to their email list. Further, a number of other omissions of material facts and disclosures are allegedly present. This site is accessible to Colorado users.
Bitconnect Ltd’s site https://bitconnect.co is accessible in Colorado, contains information regarding the sale of a cryptocurrency titled “BitConnect Coin” or “BCC,” and claims to be a platform designed to provide multiple investment opportunities for those who are seeking the possibility of income stability by allowing owners to store and invest their wealth online. The site also claims that BCC can bear interest of up to 120 percent returns per year simply by holding the currency in an online wallet. Bitconnect’s site allegedly lacks any disclosure of facts required by Colorado securities laws.
Finally, Magma Foundation, whose website www.magmacoin.org purports that the company is based in Denver, Colorado. The site promotes an ICO for a token named “MGM” that allegedly enables user to take delivery of gold at Magma’s custodial vault, or through customized gold coins that can be shipped to them and backs the cryptocurrency. The website, however, contains a number of misreprentations, chief among them that the pictures provided for the Magma Foundation team also appear on a website for a German tax consultancy firm that represented to Division staff that the identities of their employees have been taken and assigned fake names on the Magmacoin website.
All of the Respondents have until Friday, August 10, 2018 to show cause as to why the Commissioner should not file final cease and desist orders against them for the promotion and sale of unregistered and/or fraudulent securities in Colorado.