Texas Securities Commissioner issues emergency cease and desist order against cryptocurrency firm DavorCoin
The action against DavorCoin comes about a month after the Texan authorities issued a cease and desist order against BitConnect.
The efforts of the Texan authorities to tackle cryptocurrency fraud continue. About a month after the Texas Securities Commissioner issued a cease and desist order against BitConnect, a similar scheme is hit with an order. On February 2, 2018, Texas Securities Commissioner Travis J. Iles entered an Emergency Cease and Desist Order against DavorCoin, an entity offering investments in a crytpcurrency lending program in Texas.
DavorCoin has been promising investors they can earn artificially high profits by investing in a lending program based on a new cryptocurrency known as davorcoin. Investors were supposed to purchase davorcoin and then lend it to DavorCoin. The firm claims that 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.
The order specifically mentions claims by the respondent that davorcoin is “a form of digital public money” and that it “possesses value and can be traded like stocks in popular exchanges”.
The regulator notes that DavorCoin is not telling investors how it will generate the extraordinary profits it promises. DavorCoin also is not disclosing the identity of its principals or its place of business, claiming instead that “due to tax and regulatory risks,” it “cannot officialize its domiciliation.”
DavorCoin appeared to step up marketing of its lending program after the issuance of a cease and desist order by the Commissioner against BitConnect. DavorCoin responded to BitConnect’s closure by announcing “[t]his does not change anything for us,” and that DavorCoin is now “the number one lending platform in the world!!”
The Enforcement Division also found that DavorCoin is an unregistered firm and it is selling unregistered securities through affiliates. In particular, the investments in the DavorCoin lending program have not been registered and no permit has been granted for their sale in Texas. Respondent DavorCoin has not been registered with the Securities Commissioner as a dealer or agent.
Under the order, the respondent should immediately cease and desist from:
- offering for sale any security in Texas until the security is registered with the Securities Commissioner or is offered for sale pursuant to an exemption from registration under the Texas Securities Act;
- acting as a securities dealer in Texas;
- engaging in any fraud in connection with the offer for sale of any security in Texas;
- offering securities in Texas through an offer containing a statement that is materially misleading or otherwise likely to deceive the public.
DavorCoin has 31 days to challenge the order before the State Office of Administrative Hearings.
