The state of Texas just became the leading regulator of cryptocurrencies. Last Friday, the Texas State Security Board (TSSB) issued its fourth emergency cease-and-desist order over the span of a month. This time, the company under scrutiny is no other than the controversial DavorCoin.
According to the official filing from TSSB, which was signed on Feb 3rd, DavorCoin is violating sections of the Texas Securities Act by offering unregistered securities for sale and misleading the public in an attempt to lure unsuspecting investors.
The DavorCoin order is the fourth emergency action against unregistered, overseas companies selling investments tied to cryptocurrencies. The others are:
- R2B Coin, a Hong Kong-based company selling investments in its own currency, r2b coin, and telling investors the coin “will never go down in value”.
- BitConnect, a United Kingdom-based company that at the time of the order claimed a market value of $4.1 billion for its BitConnect Coin currency.
- USI-Tech, a Dubai-based company, which promised triple-digit returns from investments tied to the mining of Bitcoin.
The four companies named in orders have solicited Texas investors through websites, social media, and online advertisements.
What is DavorCoin?
DavorCoin, which claims to be one of the most ambitious cryptocurrency projects, is essentially a p2p coin lending platform oddly reminiscent of the likes of Bitconnect. Bitconnect, which was accused of being a Ponzi scheme and was eventually forced to shut down all operations last month, also received a similar cease-and-desist order from the TSSB as well as the North Carolina Security Board.
While DavorCoin boasts an interest rate of up to 48% every month, Bitconnect promised to give its investors an interest rate of 1% daily. A quick side-by-side comparison of the lending interest rate table on both websites shows the similarity between the two lending platforms:
In a statement from the TSSB to CoinDesk, the agency admitted that while its role is not to regulate cryptocurrencies it will continue to keep an eye on ‘ambitious’ cryptocurrency projects that promise to bring lucrative returns to its investors. TSSB’s Director of Enforcement, Joseph Rotunda commented:
“As cryptocurrencies continue to generate considerable attention in the media and interest from the public, these illegal and fraudulent securitized cryptocurrency offerings pose a grave threat to traditional investors. Absent a fair description of the terms of a product, the identity and qualifications of principals and the material risks associated with an offering, traditional investors may well be exposed to irreparable harm.”