New Jersey regulators issue cease and desist order against crypto firm Bitstrade
The company isn’t registered to sell securities in the state and fails to disclose material facts to investors.
The New Jersey Bureau of Securities issued an emergency cease and desist order against cryptocurrency investments firm Bitstrade late last week for fraudulently offering unregistered securities to customers.
The order effective immediately bars Bitstrade from operating in the state of New Jersey. The order claims that the company is not registered to sell securities in the state and also violates laws by failing to disclose key material facts to prospective investors, including the names of its executive officers, the address of its principal office, information about its financial condition, risks involved and how investor money is spent.
The California address listed on Bitstrade’s website does not exist and the Arizona address listed is the headquarters of an unrelated, publicly-traded internet domain registrar and web hosting company.
“The Bureau’s action today reinforces our commitment to protecting investors as they navigate the uncharted and largely unregulated domain of cryptocurrency-related investments,” Attorney General Gurbir Grewal said.
“We want to make sure that investors tempted to cash in on the cryptocurrency rage aren’t being lured into sending funds to an anonymous entity without knowing where the funds are going or how they’ll be used.”
Bitstrade claims that it is a “registered” U.S. company providing “private banking services to the masses”.
“We are working as an investment pool, collecting multiple lower value investments and grouping them into one single HUGE investment, using those funds to trade on the stock market, and generate outstanding returns. We then share back a portion of our revenue to our customers,” the company said on its website.
Bitstrade offers investment opportunities starting at just $10. The site hosts a “profit calculator” which allows potential investors to determine profit margins based on principal investment amounts, rate of return and term length. However, the Bureau found that Bitstrade provides no basis to guarantee investment profit.
All Bitstrade investments must be made using bitcoin.
“What makes Bitstrade’s fraudulent offer potentially more harmful for unsophisticated investors is that cryptocurrency is virtually anonymous, so there is no recourse for investors to recoup their losses,” Division of Consumer Affairs acting director Sharon M. Joyce said.
Investors can contact the New Jersey Bureau of Securities for assistance or to make a complaint.
Other states cracking down on crpytocurrencies
A survey of state and provincial securities regulators by the North American Securities Administrators Association (NASAA) shows 94% believe there is a “high risk of fraud” involving cryptocurrencies. Regulators also said further cryptocurrency regulations are needed to provide greater investor protections.
The New York State Department of Financial Services (DFS) released new guidelines for all digital currency entities licensed by New York State to assist in preventing, detecting, avoiding and responding to fraud.
A Senate Committee met in open session last week for a hearing to discuss U.S. regulators’ roles in monitoring and policing the fast-growing crypto industry, highlighting the potential for systemic effects. The Securities and Exchange Commission’s (SEC) compliance department highlighted the need to carefully monitor risks associated with initial coin offerings (ICOs) in 2018 as part of its annual list of priorities.
Late last month, the state of Texas effected a cease and desist order against “cryptocurrency bank” AriseBank and its entities, disclosing that they must no longer offer their services to consumers in the southern state.
Arisebank purported to be a cryptocurrency bank with locations in Texas, UAE and Switzerland. Despite these claims the company was not chartered in Texas, nor registered with any state or federal regulatory agency.
Additionally, the United States Commodity Futures Trading Commission (CFTC) reportedly issued subpoenas to digital currency exchange Bitfinex and self-proclaimed US dollar-backed cryptocurrency Tether in December.
The Internal Revenue Service (IRS) is also establishing a taskforce of investigators to track offenders with undeclared U.S. assets, including tax evaders who utilize crypto to avoid making necessary contributions.
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