The State Of Colorado Issues Cease And Desist Orders To Four ICOs
The Department of Regulatory Agencies (DORA) of Colorado has reported on November 20th that it has issued cease and desist orders for four Initial Coin Offering (ICO) startups under allegations of conducting unregulated securities offerings or other fraudulent activities.
The four ICOs are:
- Global Pay Net – GLPN Coin
- Cred – CX Token
- CrowdShare Mining – CSM Token
- CyberSmart Coin – CBST Coin
This move is the end result of the investigation carried out in May by the specially appointed ICO task force, whose focus was to reveal a potentially fraudulent activity in the market.
The task force is a part of DORA, and it has presented the results of the research to Commissioner Gerald Rome, who has signed these orders.
According to the official report published on the website of the government’s department, there are two more orders waiting to be signed.
Four illegal ICOs
The four startups affected by the Commissioner’s orders are Global Pay Net, Cred (Credits), CrowdShare Mining, and CyberSmart.
Global Pay Net
The first company, which is looking to develop an international payment platform, made a catastrophic mistake of presenting their cryptocurrency as “a full-value asset that represents one’s share in the business”. Furthermore, Global Pay Net revealed their plan to share 80% of the company’s profits with owners of their coins.
Both moves can be defined as naive because by giving these characteristics to their cryptocurrency, they have unmistakably made it a security. Of course, securities offering has to be registered with the US SEC in order to be legal, and, obviously, Global Pay Net failed to do so, which led to government’s reaction.
Government’s officials approached individuals listed to be the team behind the project, but at least two of them completely denied to have any connection with the ICO. The company also claimed that they had previously filed their offering with the SEC, which, despite all attempts, could not be confirmed.
On the other hand, the second accused startup business, trying to produce an ecologically acceptable mobile mining App, Credits, didn’t repeat Global Pay Net’s mistakes. However, according to DORA’s task force, they had presented their coin offering as a secure investment, and, in task force’s opinion, misled investors by declaring that “Cred (their cryptocurrency) will be worth tangible value.”
Therefore, the ICO under director Luke Ingraham received the same cessation order.
CrowdShare Mining, which was developing mining operation using renewable energy sources, made the same cardinal mistake as Global Pay Net, attracting investors with promises of dividends from 50% of mining rewards pool.
The most curious case is CyberSmart’s, whose ICO website claimed that they were developing a network of “profit-making machines.” Their machines, known as trading bots, were supposed to trade and profit on the cryptocurrency exchange Bitmex.
Allegedly, they also promised dividends to their investors, but their website, through which it is possible to invest in the project, clearly stated: “You may not participate in the CyberSmart ICO if you are a resident of domiciled in, or purchasing tokens from a location where YOU KNOW that it may be unlawful.”
Nevertheless, since residents of Colorado were able to access the website and weren’t technically forbidden to invest, that brief warning didn’t stop Commissioner Rome to shut down their business.
The Commissioner’s warning
After ordering these ICOs to stop their operations, the Commissioner warned all investors that they should consider all these orders against ICOs to be red flags for any such future crowdfunding campaigns they may feel tempted to join. According to him, the investigation revealed a good number of ICOs launched just to steal people’s money.
The names of the two ICOs in waiting are still unknown as are possible repercussions for individuals behind these fundraisers.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your own research and/or consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.