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US state regulator shuts down alleged crypto frauds


Fraud bricks on top of money

A regulatory body in a major US state has taken a sweep of enforcement actions this week after it became aware of what it describes as spoof emails, false promises and more from fake crypto firms.

The Texas State Securities Board issued three separate “cease and desist” orders on Tuesday against a range of companies allegedly involved in the scams.

One company, DigitalBank, is accused of a number of crimes – including preparing for an illegitimate initial coin offering, or ICO. The company was believed to be looking for investors for DBGK, a utility coin it wanted to release to the public in 2019.

Allegedly, potential traders were told that if they bought it now for $0.50 cents, then the value of the coin would rise to $10 when they sold it next year. Once scaled up, this could have meant profits stretching into the tens of thousands of dollars.

This, according to the Board, was fraud and did not contain enough information about the risks involved.

The accusation is just one of many which have been levied against DigitalBank. The company is also accused of misusing video footage of former US President Barack Obama in advertising materials for one of its other projects.

Another company, Coins Miner Investments Ltd, has allegedly issued fake emails insinuating that it is a Britain-based crypto mining company.

However, the Securities Board believes that Coins Miner may in fact be a front for a scam based in Volgograd Oblast, a part of southern Russia.

The Securities Board said that the firm had made various attempts to portray itself as a legitimate enterprise, including photographs supposedly of employees, but which were in fact just stock photos.

In a statement, it pointed out that the behaviour of the alleged scammers constituted a breach of trust.

“Spoofing and misappropriating the identity of others is an extremely dangerous practice, and it proves especially threatening when directed toward potential investors,” the Board said.

“Simply put, people are more likely to be more receptive to communications from legitimate sources or trusted parties.

“Likewise, investors are more likely to decide to send their principal to a company supported by or associated with a reliable organization or person.

“These decisions, however, are predicated not upon facts but upon a fraud, and that fraud carries a high price – perhaps the entirety of the principal investment,” it added.

In the third case, a company which promised extremely high returns to those who invested in it has also been sent a cease and desist letter.

The firm Ultimate Assets told investors that they would receive returns of 900% in both foreign exchange and cryptocurrency, specifically Bitcoin, trading.

According to a copy of the letter posted on the Board’s website, Ultimate Assets and the two men behind it, Daniel Dishman and John Jason Woodard, said that “with an initial investment of $5,000.00 investors can receive $50,000.00 in return”.

The Texas State Securities Board is very active in the field of cryptocurrency anti-fraud enforcement. It took a similar sweep of actions against allegedly fraudulent crypto firms back in July, for example.