Texas Releases Detailed Report Outlining Its Efforts to Keep Bad Crypto Players Out of the State

Texas has been one of the most aggressive states in the U.S. in rooting out bad crypto players.

Texas doesn’t care for cryptos too much.

It’s made that clear over the past few months as it has aggressively sought out the bad actors in the space, and immediately shut them down. One could say that it’s been one of the most aggressive in the U.S. when it comes to how it handles the crypto space.

Now the state’s Securities Board has released an extensive report detailing its findings.

We’ve pulled some parts of the report for you and listed them here.

Bad promoters

For four weeks, the Enforcement Division of the Texas State Securities Board investigated securities offerings tied to virtual currencies. It launched the investigation in response to what it saw as a sharp increase in the number of cryptocurrency investment opportunities being marketed to Texans.

It took a close look at promoters of cryptocurrency investments who appeared to be “illegally and fraudulently using online advertisements, social media, and other public solicitations to attract Texas investors.”

Over the course of those four weeks, 32 investigations were opened.

In the report, it’s noted:

Not surprisingly, 19 of the companies claimed they would in some way use Bitcoin – the most widely known cryptocurrency and online transaction system – by accepting it as an investment, trading it, or investing in businesses and technologies involving bitcoin.

Stunningly, none of the 32 promoters of cryptocurrencies being investigated by the agency as part of the sweep were registered to sell securities in Texas, according to the report.

Moreover, at least six of these promoters were actively recruiting sales agents to sell their investment programs without first verifying the sales agents were registered with the Securities Board, which is a no-no.

This is one of the reasons investors shouldn’t simply trust a promoter’s representations regarding its registration.

Don’t become a crypto marketer

In the report, there is also a warning about crypto marketers.

These are investors who are recruited by promoters of securities tied to cryptocurrencies. They may be asked to pitch the investments to their family, friends and others using blogs, social media, websites and online advertisements.

In return, investors may be promised not only a generous return on their principal investment, but also a position in a multi-level marketing matrix that ensures they’ll receive lucrative commissions on sales they generate, the report states.

The report notes that six of the 32 offerings caught up in the sweep involved the payment of a “finder’s fee” or some other type of commission to investors who brought new persons into the scheme.

The report concludes:

There is no question the evolution of cryptocurrencies provides legitimate businesses with new and exciting means of raising capital and promoting dynamic new technologies. At the same time, however, the Enforcement Division’s investigations revealed that the revolution in digital money is creating an environment ripe with illegal and fraudulent securities offerings.