Eleven small crypto firms are being hit with a cease-and-desist order by the California Department of Financial Protection and Innovation (DFPI) under an accusation of perpetrating a Ponzi scheme against customers.
DFPI argues the companies were using customer funds and were in breach of Californian security laws. Furthermore, the regulator claims it is possible the crypto firms were never offering the services they claimed.
In a press release to accompany the filing, DFPI says the following:
“Each of the 11 entities allegedly offered and sold unqualified securities and 10 of them also made material misrepresentations and omissions to investors,” the regulator claims.
“The entities are all alleged to have used investor funds to pay purported profits to other investors, in the manner of a Ponzi scheme. Furthermore, each of the entities had a referral program that operated in the manner of a pyramid scheme,” the press release continues.
“The entities promised to pay investors commissions if they recruited new investors, and additional commissions if the investors that they recruited, in turn, recruited new investors. The referral programs achieved their desired effect, incentivizing investors to create and post content to social media websites, such as YouTube, to entice others to invest in these entities.”
Firms Under Accusation
None of the crypto companies are major names in the industry, but the scheme shows how the nascent crypto market presents dangers for investors. In its press release, the watchdog names the following companies:
- Cryptos OTC Trading Platform Limited d/b/a COTP – purported crypto asset trading platform
- Elevate Pass LLC – purported crypto asset advertising and trading platform
- GreenCorp Investment LLC – purported crypto asset trading platform
- Metafiyielders Pty Ltd d/b/a Metafi Yielders – purported DeFi platform
- Pegasus – purported crypto asset trading platform
- Polinur ME Limited – purported metaverse software development company
- Remabit – purported crypto asset trading platform
- Sity Trade – purported crypto asset trading platform
- Sytrex Trade – purported crypto asset and forex trading platform
- Vexam Limited – purported crypto asset trading platform
- World Over the Counter Limited d/b/a World OTC – purported crypto asset trading platform
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