The State Securities Board recently ordered a crypto mining firm operating in the state to shut down its operation. According to a cease and desist order sent to Ultra BTC Mining, the company has been illegally selling investment schemes while also claiming to make unverifiable charitable donations.
About the Order
According to Texan authorities, the company has been promising to offer investors eye-watering returns. Thus far, the company has managed to raise $18 million. Investors are asked to invest $10,000 in the company’s mining operations and they could get back around $10,500 annually. Those who invest $50,000 are told that they will receive $52,000 in returns annually.
Besides that, the authorities claim that the company has been claiming to have donated $100,000 to UNICEF to help in the fight against the novel coronavirus. However, they have not provided any documentation to back their claims.
No Information On The Crypto Mining Operations
The securities board took issue with the fact that the company could not provide any material facts about their business. For instance, the company has failed to provide the specific location of their mining firm, the nature of its relationship with mining pools or the kind of mining rigs it uses. In short, Texan authorities believe the mining operation does not exist, except on paper, and the whole operation is a Ponzi scheme.
Besides Texas, the company has also been ordered to cease all operations in the state of Alabama. According to a “CON WATCH” issued by the Alabama State Securities Commission, Ultra BTC Mining and Laura Branch, an agent of the company, are ordered to stop business in the state with immediate effect. The statement notes that all of Ultra BTC Mining’s operations are illegal since they have not registered their activities with the state regulator.
Ultra BTC Mining is being accused of engaging in the sale of securities, contrary to state laws. The issue of contention is the hash power being promised to investors. According to state regulators, it qualifies as a security since it is an investment with a promise of potential returns.
The issue of whether cryptocurrencies are securities is a complex one. Currently, Telegram is engaged in a legal battle with the SEC over the issuance of what the SEC claims are unlicensed securities. To avoid the issue, Texas appears to have opted to classify the hash power as securities. However, this could open up several legal issues. Currently, the state of Texas is a leader in the crypto mining sector. Several major mining firms operate in the state and this could present new legal challenges for them.
The issue over whether or not cryptocurrencies qualify as securities is complex, and has yet to be fully resolved by lawmakers across the US. The charge against Ultra Mining sidesteps this concern by addressing the hash power used in mining, yet this too raises questions.
However, the issue of how hash power is classified could be resolved soon. State regulators in Texas have been supportive of the crypto mining sector. It is expected that they will swiftly move to offer legal clarification for the crypto mining sector.
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