Crypto Startups In Texas Fined $25000 For Selling Securities

Wilfred Michael 

Wilfred Michael

News reporter

22 February 2019,
10:30
Crypto Startups In Texas Fined $25000 For Selling Securities

An order released on February 21 by the Texas State Securities Board (SSB) confirms that the agency has reached an agreement with four crypto startups charged last year for selling unregistered securities.

The four startups — Mintage Mining, BC Holdings and Investments, Social Membership Network Holding, Nui Social, and manager Darren Olayan — were first contacted by the SSB with a cease-and-desist order in October 2017.

The investment contracts sold to Texas residents by the companies were not registered under local laws as securities neither did they qualify for an exemption.

For Mintage Mining, BC Holdings and Investments and Nui Social, the order revealed that the startup conducted a certain “Hash Rate Unit Investment Program” priced at $1 and $2 per unit and a first time purchase of 25 Units ($25).

The units entitled holders to a share of net mining revenue paid out weekly and valid for a three-year duration unless the mining business was not profitable for 60 consecutive days.

The order also stated that Social Membership Holding existed as an arm that referred new members to the unregistered investment scheme offered by the other three startups.

Penalties Defined By The SSB Order

  • Although the startups stopped offering the investment opportunities upon receiving a cease-and-desist order last year, the latest order officially stops them from doing so.

  • The startups (respondents) can only resume their “security” offering after registering it with the regulators or proving that their offering is due for an exemption from Texas State Securities Act.

  • The respondents would also pay a fine of $25000 each for defying the local Securities Act.

The latest development is not the first time that authorities in the U.S are enforcing a regulatory action on crypto startups for failing to comply with securities law. A majority of those actions, however, have come on a Federal level from the U.S SEC.

Stmarket.co reported fines imposed by the SEC on Ether Delta exchange founder, Zachary Coburn for selling unregistered securities. More recently, the SEC settled charges with a crypto project, Gladius Network, for the same offense.

 

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