On Sept. 26th, North Dakota Securities Commissioner Karen Tyler issued cease and desist orders for three companies in her state that may have been offering fraudulent ICOs.
The North Dakota Securities Department’s official release states that these orders were issued as part of an ongoing operation called Operation Cryptosweep, a multi-jurisdiction operation involving over 40 securities regulators in the U.S. and Canada.
“The expanding exploitation of the cryptocurrency ecosystem by financial criminals is a significant threat to Main Street investors. 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.”
BitConnect in hot water again
The three companies listed in the release and issued cease and desist orders were BitConnect and related companies BitConnect LTD and BitConnect International PLC, Magma Foundation and related companies Magma Coin and Magma, and Pension Rewards Platform, aka Pension Rewards.
BitConnect has been in the news for defrauding its investors before, in other states like Colorado and Texas. Tyler cautions that for now, the BitConnect site remains accessible in her state and that you should not invest in their company. Tyler points to the fact that they offer a 120 percent rate of return on an investment in their tokens as an example of their bad behavior, stating that the company is not licensed to offer securities in ND and that their claim is “unsubstantiated and misleading.”
John Oliver featured BitConnect as a prime example of the kind of dangerous fraud that can take place in the largely unregulated environment of cryptocurrency investment. The video clip of overenthusiastic spokesman, Carlos Matos, yelling “BITCONNEEEECT” he used in his segment on cryptocurrency has become a meme. In short, the company has become synonymous with cryptocurrency investment fraud. The company shut down in January 2018, and the alleged founder was arrested in August.
Magma and Pension Rewards
Magma is also still currently active and available to the residents of ND, though Tyler states in her release that images used to depict the company heads are fraudulent and that those employees are also assigned fake names. Their site also claims additional “fraudulent information,” unsubstantiated claims, and is not registered in the state to provide securities.
Pension Rewards sells itself as a marketplace for freelancers, using a token called “Pcoin” or “$Pcoin” as its currency and connecting members of the gig economy to opportunities for work. It echoes the other two companies in its claims that investors will see incredible return in very little time, providing no proof of these claims. According to Tyler, they do not disclose material financial or risk information to their investors, a massive red flag. They are also unregistered in ND.
How to spot bad ICOs
Tyler lays out some common red flags raised by sketchy ICOs in her release and provides some additional material potential investors can use to educate themselves. One common red flag according to her is the use of plagiarized white papers, which usually contain spelling errors and errors in translation. These fake white papers can also use false celebrity endorsements, stock photos taken from online, or addresses and phone numbers that don’t check out. Of course, another thing they all have in common is the promise of a ridiculously high reward for virtually no risk.
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