North Dakota Regulator Issues Cease and Desists Against 3 ICOs

The North Dakota Securities Department last week issued cease-and-desist orders against three companies promoting initial coin offering (ICO) in the state.

Karen Tyler, the Securities Commissioner, named Crystal Token, Advertiza Holdings (Pty) Ltd., and Life Cross Coin aka LifecrosscoinGmbH, as the latest offenders involved in illegal business practices related to cryptocurrencies. Investigations found that the accused companies were selling securities without obtaining a license. Moreover, their products include unrealistic promises that could intentionally harm North Dakotan investors psychologically and financially.

“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,” Tyler stated as she made the named of alleged scam conspirators public.

Fake Utility Tokens, Advertising

Crystal Token was offering an ERC20 standard token identified as CYL as security that would guarantee 2 percent daily returns to its holders. The company’s website was full of allegedly fraudulent statements with claims of unrealistic rates of return on investment. Crystal Token also failed to provide adequate disclosure of the management team’s credentials and deliberately withheld their identities.

Life Cross Coin, on the other hand, was a few steps ahead. It was operating through a website associated with online crimes such as ransomware, identity fraud, and trojan. Similar to Crystal Token, the site allegedly lured investors into purchasing and holding a token identified as LICO in returns for profits. Advertiza Holdings had also issued a utility token TIZA which, according to SEC, was security which promised holders that they would “make a profit from the appreciation” of the company’s returns.

Operation Cryptosweep in Full Swing

Tyler admitted that their latest action against the local crypto offenders was a part of Operation Cryptosweep, a coordinated multi-jurisdiction drive against the crypto scams in the US and Canada. The ride so far has led to more than 250 active investigations, according to the US Securities and Exchange Commission (SEC).

North Dakota itself has been to the forefront of sacking companies involved in crypto crimes. On September 26, Commissioner Tylor confirmed issuing cease-and-desist orders against BitConnect LTD and BitConnect International PLC, Magma Foundation and related companies Magma Coin and Magma, and Pension Rewards Platform, aka Pension Rewards.

Nevertheless, the SEC crackdown has also received flacks from the local crypto community, particularly for working under the pretext of an old law – Howey Test – that does not fit the multifaceted nature of cryptocurrencies. Just last month, a group of financial experts had met the lawmakers to discuss the issues, fearing local blockchain startups will move out of the country in the absence of a concrete crypt law.

“If the rules are unclear, unwritten, or unknown it’s not appropriate to punish people for making the wrong guess,” said David Forman, the chief legal officer at Fidelity Investments.

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