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South Carolina Ends Cease & Desist Orders Against Crypto Startups

South Carolina’s securities regulator has ended cease-and-desist orders against two blockchain startups, public documents revealed Thursday.

The South Carolina Attorney General’s office, which oversees securities regulation in the state, published two orders explaining that a cease-and-desist filed against blockchain startup ShipChain in May was vacated, and another complaint filed against mining firm Genesis Mining in March removed the company as a respondent. The moves mark the first time such orders were dropped against blockchain startups in the state.

The regulator had claimed that ShipChain’s tokens and Genesis Mining’s mining contracts were both unregistered securities. ShipChain pushed back against this claim in May, saying in a statement that the firm did “not believe [its] tokens are securities.” Furthermore, ShipChain claimed it was unaware South Carolina residents could purchase its SHIP tokens.

On Thursday, deputy securities commissioner Tracy Meyers wrote “the Securities Division of the Office of the Attorney General of the State of South Carolina, after receiving information regarding matters detailed in the Administrative Order to Cease and Desist issued … upon due consideration of such information, finds good cause has been shown to vacate the [order],” referring to ShipChain.

Similarly, Genesis Mining was dismissed from a its own cease and desist order. Swiss Gold Global, which was charged with acting as an unregistered broker-dealer for Genesis Mining at the same time, was not dismissed from the order.

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Vermont Regulators Hit ICO With Cease-and-Desist Notice

A company behind an ongoing initial coin offering (ICO) has been issued a cease-and-desist notice from the U.S. state of Vermont.

The Vermont Department of Financial Regulation said Monday that it was sending the cease-and-desist to LevelNet, which according to its website is based in Irving, California. Officials accused the firm of “violations related to the Vermont Uniform Securities Act” and ordered it to stop selling tokens tied to its cybersecurity-related platform.

Per the LevelNet website, approximately $752,000 has been raised thus far during the sale. An emailed request for comment was not returned by press time.

The action came as part of a broader crackdown on investment schemes involving cryptocurrencies known as Operation Cryptosweep. As previously reported by CoinDesk, a range of securities regulators in the United States and Canada have coordinated their efforts in a bid to stifle token sale and cryptocurrency scams.

According to the North American Securities Administrators Association (NASAA), “nearly 70” on inquiries have been launched in recent months.

“The rapid rise of Bitcoin has made Main Street investors aware and interested in cryptocurrencies and ICOs,” Michael Pieciak, a commissioner for the Vermont Department of Financial Regulation, said in a statement, adding:

“Although many are legitimate offerings that are fully compliant with law – many are not – and this order serves as a good reminder to exercise caution when considering investing in these products.”

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Austrian Regulator Freezes Crypto Mining Firm Amid Investigation

Austria’s Financial Market Authority has barred a cryptocurrency mining firm from operating, alleging that the company violated the nation’s banking laws.

The regulator announced Tuesday that it had “prohibited the business model of INVIA GmbH,” a mining firm, claiming that it was offering an unauthorized Alternative Investment Fund in violation of the Austria Banking Act. However, the full investigation into the company has not yet been completed, according to a press release.

INVIA World, the company behind INVIA GmbH, claims to mine the most profitable cryptocurrencies using a proprietary algorithm, as explained in a forum post. The mined tokens are converted to bitcoin or ethereum, which are then paid out to investors.

According to the FMA’s release, INVIA did not register with the regulator, and likewise, is not licensed to offer financial products like alternative investment funds.

The move marks the first time in almost a year that the regulator has warned a cryptocurrency firm to halt its operations. Last July, the FMA stated that OneCoin was not authorized to issue or administer payment instruments, as previously reported by CoinDesk.

At the time, the regulator posted a warning on its website, alerting investors about the fraudulent nature of the scheme.

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ShipChain Pushes Back Against Securities Violations Claims

Supply chain startup ShipChain claims it was unaware its SHIP tokens were available to South Carolina residents in its first public response to the state’s cease-and-desist order.

The blockchain company said in its statement that “ShipChain does not believe that [its] tokens are securities,” responding to an order issued by the South Carolina Attorney General’s office on Tuesday. At the time, the securities division within the office claimed that ShipChain “continuously offered investment opportunities in the ShipChain platform and the corresponding tokens to South Carolina residents,” but that it was not a registered broker-dealer or filed for an exemption to South Carolina securities registration requirements.

and that if South Carolina’s Securities Commissioner “had ever contacted ShipChain, ShipChain would have shown that its private sale of tokens was conducted in a manner consistent with applicable securities laws requirements.”

The startup emphasized that it only sold its tokens to accredited investors, adding “that none of the purchasers of SHIPs in that initial sale are South Carolina citizens or businesses.” Further, the company claimed that “ShipChain is not aware that SHIPs were even offered in South Carolina or to any South Carolinian during the private sale.”

ShipChain chief executive John Monarch repeated these claims, telling CoinDesk that “ShipChain did not conduct a public sale, nor sell to South Carolina residents/businesses, and has no plans to in the foreseeable future.”

He added:

“Our software development team is in South Carolina and since January we have not been offering, issuing, or selling tokens, and already had no plans to do so for the foreseeable future. Therefore, we are confident that there is no way for this to occur.”

In its statement, ShipChain said that it was “regrettable that [its developers] were not given the opportunity to respond before these erroneous accusations were aired,” adding that team members would be willing to “alleviating [the South Carolina Securities Commissioner’s] concerns and clearing the record.”

As previously reported, ShipChain has 30 days from the issuance of the cease-and-desist order to request a hearing with the securities regulator.

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South Carolina Sanctions Startup Over Unregistered Token Sales

Blockchain startup ShipChain has been hit with a cease-and-desist order from the South Carolina Attorney General’s Office, which claimed the company violated the state’s securities statutes.

The state’s Securities Commissioner said in an order issued Monday that ShipChain offered what amounts to an investment contract by way of its token, which is “the only medium of exchange on the platform.”

The order stated:

“At all times relevant to this Order, Respondent ShipChain continuously offered investment opportunities in the ShipChain platform and the corresponding tokens to South Carolina residents through its website and in-person events held in South Carolina. At no time relevant to the events stated herein was Respondent ShipChain registered with the Division as a broker-dealer, and no exemption from registration has been claimed by Respondent ShipChain.”

ShipChain bills itself as an ethereum-based platform for tracking the shipment of goods. It’s also a member of the Blockchain in Transport Alliance, which counts major firms such as FedEx and JD.com among its ranks.

The order – if finalized – would bar ShipChain from “transacting business” and “from participating in any aspect of the securities industry in or from the State of South Carolina.” The startup has 30 days to request a hearing on the matter, where it may argue that its token sales do not qualify as an unregistered securities offering.

A request for comment was not immediately returned by ShipChain. However, the startup acknowledged the order on Twitter and said it was working on a formal response.

ShipChain’s publicly traded token saw a steep drop in value on Tuesday, and as of press time is trading at $0.065 – down 39 percent compared to yesterday –  according to data from CoinMarketCap.

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Crypto Miner Genesis Hit With Cease-and-Desist Order

Cloud mining service Genesis Mining has been ordered to stop operating in the state of South Carolina, according to a cease-and-desist order released on March 9.

Genesis and a second firm, Swiss Gold Global Inc., were named in the order, which says that mining contracts sold to state residents are considered securities. The Securities Commission of South Carolina alleged that Swiss Gold Global acted as a broker-dealer for Genesis, but that it hadn’t registered in the state to offer securities.

“At all times relevant to this order, Respondent Genesis Mining continuously offered investment opportunities in Mining Contracts to South Carolina residents through its website. At no time relevant to the events stated herein was Respondent Swiss Gold Global registered with the Division as a broker-dealer, and no exemption from registration has been claimed by Respondent Swiss Gold Global.”

Through the contracts, buyers essentially purchase an amount of computing power over a period of time that is hosted elsewhere, as opposed to owning mining hardware themselves. In the Commission’s view, they “constitute investment contracts and are thus securities” under South Carolina law.

Both firms were ordered to stop doing business in South Carolina, according to the document. Additionally, both Genesis and Swiss Gold Global were permanently barred from offering any securities in the state in the future. That said, the companies have the opportunity to a request a hearing with state officials to present their side.

The move represents the latest cryptocurrency investment-related cease-and-desist order to come out of a U.S. state regulator in recent weeks. To date, state officials have sent orders to a number of firms, most recently the one behind a cryptocurrency endorsed by film actor Steven Seagal.

The full cease-and-desist order can be found below:

C&D by CoinDesk on Scribd

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New Jersey Issues Cease-and-Desist to Crypto Investment Firm

New Jersey regulators have sent a cease-and-desist letter to an online cryptocurrency investment site, alleging that the company is fraudulently offering securities in the state.

The state’s Bureau of Securities, along with the New Jersey Attorney General, said Friday morning that it was moving to prevent Bitstrade from making further offerings, which officials said failed to disclose information about its physical location, financial health or the names of its senior employees.

Bitstrade boasts on its website that it is “a registered United States company providing Private Banking service to the masses,” though the address listed at the top is the same as Blue Razor, a domain registration company based in Scottsdale, Arizona. A message sent through Bitstrade’s online message system was not immediately returned at press time.

According to the release, Bitstrade is not currently registered to offer securities in the state.

Attorney General Gurbir Grewal said in a statement:

“The Bureau’s action today reinforces our commitment to protecting investors as they navigate the uncharted and largely unregulated domain of cryptocurrency-related investments. We want to make sure that investors tempted to cash in on the cryptocurrency rage aren’t being lured into sending funds to an anonymous internet entity without knowing where the funds are going or how they’ll be used.”

Friday’s developments continue a recent trend of state regulators issuing cease-and-desist letters to suspected cryptocurrency scams.

In the past month, regulators in Texas, for example, have sent such notices to a Hong Kong-based company behind an ICO and a crypto-lending platform akin to BitConnect, which collapsed last month and has since sparked several class-action lawsuits in the U.S.

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Philippines Securities Regulator Orders Halt to ICO

The Philippines Securities and Exchange Commission filed a cease-and-desist order against four companies and an operator running an initial coin offering (ICO), citing securities registration regulations, a newly released document reveals.

The order, dated Jan. 9, 2018 and posted on the agency’s website today, cites four affiliated companies – Black Cell Technology Inc., Black Sands Capital Inc., Black Cell Technology Limited and Krops – as operators of the KropCoin token sale, claiming to sell “the world’s first agriculture marketplace crypto equity ICO.”

The document also identifies Filipino resident Joseph Calata as a founder or executive for all four companies.

All four of the companies declare their affiliation with the KropCoin token, which the filing notes is built on the ethereum network.

While ICOs are not regulated within the country, the SEC’s Enforcement and Investor Protection Department (EIPD) claims that “there is substantial evidence that [the companies] are selling or offering securities in the form of KROPS Tokens and/or Kropcoins to the public, in the Philippines, without the necessary license from the Commission.”

The EIPD filing notes that the four companies have five days to file an appeal of the order, and can have a hearing within 15 days if they do. The SEC then has a further 10 days to resolve or reject the appeal; otherwise the cease-and-desist will be automatically lifted.

Calata and the four companies may be able to resume the token sale if they register with the SEC and receive a license to sell securities in the country.

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Malaysia Securities Watchdog Issues ICO Cease-And-Desist

Malaysia’s securities market watchdog has issued a cease-and-desist to a startup ahead of its planned initial coin offering (ICO).

The CopyCash Foundation, according to a statement from the Securities Commission Malaysia (SC), was sent the notice following an inquiry into its pitch to investors. On its website, CopyCash promotes itself as a platform for “social travesting”, or a mixture of investing and trading.

“The directive was issued by the SC following its inquiry after it found that there is a reasonable likelihood that disclosures in CopyCash Foundation’s white paper and representations to potential investors will contravene relevant requirements under securities laws,” the agency said in a statement.

The SC referenced CopyCash in a Jan. 5 statement on the blockchain funding model, noting at the time that it planned to meet with representatives of the CopyCash Foundation “to inquire into its activities including the purported launch of [CopyCashCoin].”

That the regulator would act swiftly to issue the cease-and-desist notice is perhaps unsurprising, given moves by agencies in other parts of the world to quash ICOs ahead of their launch. SC said in its Jan. 5 statement that it had noticed an uptick of ICO promotion within Malaysia, including solicitations of elderly citizens.

The SC added that it would work with other bodies, including Malaysia’s central bank, on the ICO issue.

“The SC continues to work with Bank Negara Malaysia and other enforcement agencies, including our foreign counterparts, to closely monitor such activities and will take appropriate action where necessary,” the agency said at the time.

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