US States now Battling ICOs: Colorado Shuts Down 18 Fraudulent Offerings

The state of Colorado has demonstrated its firm stance regarding fraudulent Initial Coin Offerings (ICOs) by shutting down 18 ICOs in 2018. The most recent order, signed into effect November 20^th 2018, called for the cease and desist of four ICOs available to Colorado-based investors.

Colorado Likely to Halt 20 ICOs by 2019

Colorado remains notably active in the enforcement of cryptocurrency-related securities violations.

Most recently, Colorado’s Department of Regulatory Agencies (DORA) has signed four orders against initial coin offerings (ICOs) which offer allegedly fraudulent sales to Colorado residents. The orders entail an immediate cease and desist of operations.

DORA’s Division of Securities launched in “ICO Task Force” in May of 2018. To date, they’ve directed the cessation of non-compliant offerings to 18 ICOs, with two additional orders pending.

On November 20^th 2018, four orders were signed into action effectively directing the cease and desist of the following ICOs.

Global Pay Net

Global Pay Net is marketing an ICO which claims to provide an international financial platform based on blockchain technology. It offers GLPN Coins which are “full-value assets that represent one’s share in the business”. It goes on to claim that “investors receive 80% of the company’s profits”.

Additionally, Global Pay Net’s website identified several cryptocurrency professionals as involved in the project. So far, two of those individuals denied such involvement. The company also claimed to have filed with the SEC’s EDGAR database, though the filing could not be verified as the associated phone number has since been disconnected.

Credits LLC

Cred, which operates as Credits LLC, has promoted an ICO in support of green energy through the currency known as Cred (CX). The website encourages future profits of investments by claiming “Cred holders can be rest assured knowing that their Cred will be worth tangible value”. Credits LLC president, director, and alleged ICO manager Luke Ingraham has a listed address in Colorado, resulting in the legal constitution of a security in the state of Colorado.

CrowdShare Mining

CrowdShare Mining has launched an ICO with a cryptocurrency called CrowdShare Mining (CSM). The website claimed that its team would mine cryptocurrency with renewable energy and promised to provide investors with 50% of mining profits in dividend form. In addition, the site asserted that during CSM Coin’s 4^th year, a minimum of a “1,000%” return on investment would be made to those who purchased CSM at it’s very start.

CyberSmart Coin Invest

CyberSmart Coin Invest conducted an ICO to offer its CyberSmart Coin (CBST). The website behind the operation provided the following claim:

“Our statement and ideas are oriented in creating a large network of ‘profit making machines’ and friends with a lot of benefits for all our CBST users, even for the ones that will have just 1 coin.”

In addition, the website claimed to use robots on various exchanges which utilized a “secret” method of returning profits. The team promised to provide investors with 20-35% dividends each month.

The Colorado Securities Commission on Cryptocurrency 

In concluding his statement regarding the four orders, Colorado Securities Commissioner Gerald Rome provided the following message to all investors:

“The sheer number of orders entered against ICOs should be a red flag to all investors that there is a real risk that the ICO you are considering is a fraud. Our investigations show that there are fraudsters who will simply create a fake ICO to steal investors’ money, or spoof a legitimate ICO to trick investors into wrongfully paying them.”

The increased enforcement from Colorado’s agencies is reflective of the United States’ federal regulatory body for securities— the SEC.

Last week, the SEC imposed its first-ever penalties for ICO securities registration violations. Two weeks ago, the SEC charged EtherDelta’s founder with operating an unregistered securities exchange.

Many speculate that the increased regulatory enforcement will push the cryptocurrency industry to security tokens.

Security tokens involve the tokenization of a financial asset which has been subject to regulatory enforcement prior to blockchain technology. Therefore, compliant security tokens allow for regulations to be transparently enforced through algorithmic protocols in the process of tokenization. For more on these processes and benefits, check out our complete security token guide.

Some companies have already publicly announced the diversion from ICOs to Security Token Offerings (STOs).

Whether or not such a transition will become an industry standard, has yet to unfold.

What do you think of Colorado’s action against fraudulent ICOs? Will other states become more active and clean up the remaining ICO space? Let us know what you think in the comments below.

 Image courtesy of Denver Business Journal.