Texas Securities Commissioner issues a Cease and desist order to Bitconnect

The Texas Securities Commissioner enacted an emergency cease and desist order to BitConnect operations. The commissioner considered that the investment schemes proposed by BitConnect were securities under the Texas Securities Act. Therefore they should have been registered before the commission and the Company itself should have been registered for offering securities.

The company offers currently two investment programs. In the “BitConnect Lending Program”, investors purchase BitConnect Coins, which are provided to a “BitConnect Trading Bot” to generate returns as high as 40% a month. The BitConnect Staking program offers a “safe” interest of up to 120% a year. Moreover the company is planning a new ICO BitConnectX on january 10, 2018. 

The Commissioner also accuses BitConnect of fraud by intentionally hiding critical information, for instance the obligation to pay investors who stake BitConnect coins. Claims such as the representing the investment schemes as safe, disclaimers about the accuracy of the the website, or the promise of the payment of commissions to individuals without mentioning the registrations requirements are also considered misleading and deceptive. 

While the company behind BitconnectCoins, Bitconnect LTD, is registered in England, the Commissioner observed that the coins are offered to residents in Texas and therefore the Commission has jurisdiction over those operations. 

The US Securities Exchange Commission (SEC) released in July “The DAO” report, applying four criterias to determine whether DAO tokens were securities according to case Law ( SEC v. W.J. Howey Co. 1946). Since then, the SEC investigated cases such as Protostarr, REcoin and Munchee, ordering the cease and desist of proceedings.