Texas state regulator found widespread fraud in cryptocurrency offerings during an investigation of investment offerings that were tied to virtual currencies.
A four-week investigation by the Enforcement Division of the Texas State Securities Board (TSSB), that began on December 18, reviewed investment offerings that were floated by promoters who appeared to be illegally and fraudulently using online advertisements, social media, and other public solicitations to attract Texas investors.
None of the 32 investment promoters investigated were registered to sell securities in Texas, a violation of the Texas Securities Act. It was found at least five investment promoters guaranteed returns as high as 40 percent per month, while not elaborating on the investment risks.
Thirty investment promoters were broadly using websites, social media, and online advertising to market to Texans. Seven promoters were offering securities tied to a new cryptocurrency, while six were offering commission to investors who recruited new investors into the scheme.
Only 11 promoters provided a physical address to potential investors, with the rest of the promoters providing none which will leave investors with little recourse if they lost their money.
"The investigations show significant risks in investing in securities that supposedly use cryptocurrencies to enrich investors. There is a lot of hype surrounding cryptocurrencies, but the companies offering investments are often not disclosing all the information investors need to make an informed decision," Securities Commissioner Travis Iles said.
The TSSB has been one of the most active state regulators with regard to cryptocurrencies for the well being of investors in Texas. It was the first to enter an order against a cryptocurrency firm and has entered the most orders of any state regulator.
Following the investigations, the Securities Commissioner has taken seven actions against illegal or fraudulent cryptocurrency promoters.
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