3 more ICOs shut down by North Dakota securities watchdog

A North Dakota security watchdog is keeping tight reins on initial coin offerings (ICOs) in the U.S. state. Last Thursday, the commissioner of the North Dakota Securities Department (NDSD), Karen Tyler, issued a cease and desist order against three firms that were discovered to be involved in promoting fraudulent securities and illegal business practices related to ICOs in the state. The North Dakota financial regulator carried out an investigation, Operation Cryptosweep, to identify ICOs and cryptocurrency-related investments that pose a risk to North Dakota investors.

The investigation revealed that the companies involved—Crystal Token, Advertiza Holdings (Pty) Ltd., and Life Cross Coin aka LifecrosscoinGmbH—were selling securities without obtaining a license. Also, the companies were accused of using fraudulent statements on their websites whereby they all claimed to give high returns without any proof of how they would achieve them. Crystal Token was not registered with the Securities and Exchange Commission (SEC) and so the firm could not offer securities in the state, according to the NDSD. Equally, Advertiza claimed to offer securities which promised high returns through its virtual currency called “Tizacoin” (TIZA), while Cross Coin was found to have used a Berlin IP address that was already linked to ransomware and trojans. Generally, the investigation found out that the firms could be harmful to investors, according to the state regulator.

This was not the first time the department took action against ICOs in the state. Last month, the NDSD issued cease-and-desist orders against three other companies: BitConnect, Magma Foundation and the Pension Rewards Platform. Tyler said about the orders, “The continued exploitation of the cryptocurrency ecosystem by financial criminals is a significant threat to Main Street investors.”

The commissioner noted, “In formulaic fashion, financial criminals are cashing in on the hype and excitement around blockchain, crypto assets, and ICOs – investors should be exceedingly cautious when considering a related investment.”

Regulators are putting up more frameworks to protect investors. The SEC has announced that it will sue crypto companies offering pump-and-dump schemes, as well as ICO projects who have false SEC approvals.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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SEC wants subpoena enforced in $100M Cherubim ICO probe

The U.S. Securities and Exchange Commission (SEC) is taking steps to enforce a subpoena against an investment company and its sole trustee, over allegations of their fraudulent involvement in a $100-million initial coin offering (ICO).

In a statement published this week, the securities regulator said it was asking a district court to assist in enforcement action, as it continues to examine whether Jeffre James and Saint James Holding and Investment Company was involved in a “pump and dump” scheme around shares in Cherubim Interests, Inc.

The commission said it had reason to suspect Cherubim had misled investors around the SJTCoin. In particular, they suggest false public statements had been used to generate significant demand pressures in the market for Cherubim shares, which were later exploited by the Saint James and their trustee.

SEC said following its ongoing investigation, it has reason to believe that in a bid to “pump” its stock price, Cherubim issued false public statements in January 2018 claiming that the company had executed a $100,000,000 financing commitment to launch an ICO for St. James Trust.

“After Cherubim’s stock price and trading volume increased on this news, certain individuals associated with the company may have ‘dumped’ their overvalued Cherubim stock for significant profits,” according to the regulator.

Despite being personally served with court documents, neither James nor Saint James have responded to date. As a result, the SEC has now progressed matters through the courts, in a bid to obtain the requested documents from both parties.

The SEC said it is seeking “an order from the court compelling James and St. James Trust to produce all responsive documents.” The court must now decide whether to compel the parties to cooperate, in submitted the documents requested under the subpoena.

The news is in line with the SEC’s warning issued back in August 2017 that it would pursue those using ICOs to defraud and scam unsuspecting crypto investors.

It marks the latest high profile case involving the SEC, as the regulator continues to make its presence felt around dubious investments and outright scams blighting the cryptocurrency sector.

It remains to be seen whether Saint James, or Jeffre James himself, will now step up their cooperation with the authorities investigating the issue.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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CFTC goes after crypto fraudsters accused of impersonating regulators

Two people are facing a slew of charges, including fraudulent solicitation, impersonation and forging official documents in the United States—all in an effort to steal cryptocurrency.

Last Friday, the Commodity Futures Trading Commission (CFTC) filed charges against Morgan Hunt, of Arlington, Texas, and Kim Hecroft, of Baltimaor, Maryland. The two were accused of engaging “in a fraudulent scheme to solicit Bitcoin [BTC] from members of the public, through false or misleading representations or ommissions, to invest in trading products” like binary options, diamonds or margined foreign currency contracts.

Hunt, who may be doing business as Diamonds Trading Investment House, and Hecroft, who operates First Options Trading, were also accused of forging account statements, impersonating a CFTC investigator and forging official CFTC documents.

According to the complaint filed at the U.S. District Court for the Northern District of Texas, Hunt and Hecroft used documents allegedly authorized by the General Counsel of the CFTC for their scheme. Using the documents, they managed to trick members of the public into paying a “tax obligation” to the CFTC if they want to withdraw funds from their crypto accounts.

At least two people were confirmed to have fallen victim to Hunt and Hecroft’s scam, which allegedly started in January 2017. According to the CFTC, the two used Facebook and emails to communicate with their clients. Hecroft allegedly tricked a customer into transferring more funds in BTC by letting the victim believe they were paying their taxes to the CFTC. Hunt, meanwhile, arranged for an accomplice to pose as a CFTC investigator in a phone conversation with his customer.

James McDonald, director of enforcement at the CFTC, clarified that the commission does not collect taxes on cryptocurrencies. He warned the public to be more vigilant against such incidents, saying, “The CFTC is on guard against fraudsters who try to take advantage of the CFTC’s reputation in order to cheat customers, and will take swift action against such misconduct.”

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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US securities regulator chases enforcement against PlexCoin promoters

The U.S. Securities and Exchange Commission (SEC) has petitioned a court in New York for enforcement action against two individuals over their involvement in the “fast-moving” PlexCoin ICO investment scam.

Following investigations into the affair, the SEC has resorted to the courts, in pursuit of a motion “to compel” and “for discovery sanctions” against Sabrina Paradis-Royer and Dominic Lacroix over the promotion of PlexCoin, Finance Feeds reported.

Canadian courts ordered PlexCoin to suspend its ICO offering, but authorities said the organizers ignored the ruling and raised some $15 million for the project.

The SEC previously shut down the project, citing concerns over potential fraud. Now, they are looking to apply further pressure, following a lack of cooperation from the scheme’s promoters, including ignoring previous court orders.

According to the court filing, the securities regulator is seeking a default judgement on the grounds of “prejudice…to [Plexcoin’s] investor victims.” In particular, the SEC “seeks leave, pursuant to Rule 3(A) of this Court’s Individual Motion Practices and Rules, to file a motion to compel and a motion for discovery sanctions against Dominic Lacroix and Sabrina Paradis-Royer (collectively “Defendants”) under Rule 37(a) and Rule 37(b) of the Federal Rules of Civil Procedure.”

“Defendants’ dereliction coupled with the prejudice to the Commission and to Defendants’ investor victims warrants the serious sanction of a default judgment against them under Rule 37(b)(2)(A)(vi),” the filing read.

Lacroix and Paradis-Royer were sued by the SEC back in December, on grounds of securities fraud. At the time, their assets were frozen under an emergency order. Their assets were refrozen in June after it was alleged the pair had been using hidden accounts.

According to the SEC at the time, “Lacroix had been using secret accounts, including an account in his brother’s name … to improperly dissipate for personal use digital assets obtained from investors during the PlexCoin Initial Coin Offering.”

With the latest filing, the SEC has concluded the pair have no intention of cooperation, petitioning the court to grant the enforcement action and sanctions it demands. Whether this allows any further assets to be recovered remains to be seen.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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GAW Miners CEO gets 21 months’ jail time over fraud charges

The Hartford federal court in the U.S. state of Connecticut has sentenced the chief executive officer of crypto firm GAW Miners to 21 months imprisonment on charges of defrauding investors.

On Thursday, the Hartford Business reported that Homero Joshua Garza originally faced 20 years in prison, but his sentence was reduced after the man pleaded guilty on a wire fraud charge in connection with the development and sale of a cryptocurrency called PayCoin.

Garza is expected to start his sentence on January 4, 2019, and will be released in 2021. After his release, he will be expected to undergo supervision for a period of three years which will include a six months of home confinement. He is also expected to fully pay back investors their money, which is approximately $9.2 million. This is in addition to the $9.9 million restitution Garza’s ordered to pay in connection with a separate lawsuit.

Garza founded GAW Miners to sell crypto mining hardware in May 2014. However, the firm eventually ventured into selling cloud-based services to make more money. Investigators said Garza also created a fake cryptocurrency called PayCoin (XPY), and promised investors that the coin and its trading platform PayBase would be integrated with Amazon and major credit card companies to create an XPY debit card. Records show that people invested about $9 million in cryptocurrency.

Garza also promised investors that his cryptocurrency would never fall below the $20 mark as he had arranged to have the prices always above the marked price. He claimed to have PayBase support mechanisms, which included $100 million in company reserves and coordinated price pumps. After investigation, the U.S. Securities and Exchange Commission (SEC) and the FBI revealed that Garza never had any funds reserved for this purposes. The highest price PayCoin reached was $15.92, according to CoinMarketCap data.

According to reports, Garza was able to run his operations with the help of ZenMiners who sold their cloud based services to investors. Garza had also lied to investors that the company had purchased an $8 million stake in ZenMiner. Before authorities caught up with him, Garza had run his operations for a period of nine months.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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