BitConnect Runs into Trouble with Texas Regulators
BitConnect, an open-source, cryptocurrency trading and community platform, has received an Emergency Cease and Desist Order from the Texas Securities Commissioner for the unlicensed marketing of securities. The Texas State Securities Board states the following in a January 4th press release:
The Securities Commissioner found that the BitConnect investments are securities, but were not registered as required by the Texas Securities Act and State Securities Board Rules and Regulations. In addition, the company is not registered to sell securities in Texas.”
Unauthorized Marketing of Securities
According to the order, BitConnect makes unauthorized claims about the nature of its trading platform and programs. The most blatant example is found in the BitConnect Staking Program, which was found to be offering potential investors a chance to earn interest of up to 120% annually. The BitConnect website also repeatedly referrers to its token (BCC) as an “investment”.
BitConnect is not authorized to sell investment securities in the state of Texas; therefore, the marketing of the BCC token constitutes a violation. In addition, the order claims that BitConnect is willfully refusing to reveal the identity and “qualifications” of the people behind its trading algorithm and volatility software – this information is considered material fact under Texas securities law.
Despite conducting operations around the world, BitConnect is based in the United Kingdom, and the Texas Cease and Desist Order may have limited impact on the company’s international operations. Nevertheless, all U.S states have regulations pertaining to the marketing and sale of securities, and the situation in Texas may lead to a domino effect in other jurisdictions.