05 Feb Texas cracks down on cryptocurrency cowboys
It could be just part of the Texas Ranger heritage, but Texas certainly is cracking down on cryptocurrency cowboys.
Texas State Securities Board (TSSB) regulators issued their fourth emergency cease-and-desist order in the past month, this time targeting DavorCoin. The state claims the company violates the Texas Securities Act by offering an unregistered security for sale and by misleading the public.
Earlier in January, TSSB had shut down BitConnect a pseudo-cryptocurrency exchange offering a similar lending product and features.
Wishful ROI claims
Looking at the DavorCoin website, some of the return on investment claims are a stretch to say the least. For example, using the company’s “Profit Calculator”, if you invest $25,001, the company claims you’ll earn back $5,325.30 within 30 days or a 21.3% return. By the 90-day “Release date”, the company says you will earn $15,798.39 or a return of 63.19%.
DavorCoin has a multilevel Affiliate program starting at 8% for Level 1, 4% at Level 2, 2% at Level 3, 1% at Level 4 and a final 1% at Level 5.
The whitepaper is woefully inadequate with no substantial information other than a rehash of the landing page sales and marketing pitch. Absent are information about the founders, management group, advisors, technical team, business plan, business address and other meaningful details investors depend on to make an informed judgment.
That didn’t stop investors from talking up the Initial Coin Offering in November 2017.
While the company claimed it would be listed on numerous exchanges, now, DAV appears to trade only on CoinExchange and was at $1.67, down 65% at Feb 5, 2018 according to CoinMarketCap.com.
TSSB cease-and-desist order details
The TSSB order is harshly critical of the company:
“The emergency order found that DavorCoin is telling investors they can earn lucrative profits by investing in a lending program based on a new cryptocurrency known as davorcoin. Investors allegedly purchase davorcoin and then lend it to DavorCoin.
According to the order, DavorCoin says an investor lending $30,000 in davorcoin may earn $15,390 in the first month of the program and receive $107,217 after 120 days.
DavorCoin, however, is not providing any details about how it will generate such profits. DavorCoin also is not disclosing the identity of its principals or its place of business, claiming instead that “due to tax and regulation risks,” it “cannot officialize its domiciliation.”
If it’s too good to be true…
As always, this type of investment scam is preying on unsophisticated investors caught up in the fear of missing out on making big returns with cryptocurrency.
TSSB Commissioner Travis J. Iles warned would-be investors not to buy into the hype surrounding cryptocurrencies without determining exactly what they are investing in.
“Promoters of fraudulent securitized cryptocurrencies are using technology in a way that conceals their identity and their actions,” he said. “Ultimately, investors are investing in nothing more than a promise made through a website maintained by an anonymous group.”
It’s fortunate Texas and other US states are monitoring these investment schemes closely and the SEC will soon crack down even harder as other similar scams proliferate.