AUSTIN (CN) – Texas state securities regulators halted the sale of a new cryptocurrency by United Kingdom-based BitConnect Thursday, claiming the firm is misleading investors and promising annualized returns of at least 100 percent.
The Texas State Securities Board issued an emergency cease-and-desist order to Ashford, England-based BitConnect regarding the sale of its new BitConnect Coins, or BCC.
The board says BitConnect has put 9.4 million BCCs into its online marketplace, representing a value of $4.1 billion.
“The company requires individuals to use Bitcoin, a more established cryptocurrency, to invest in various BitConnect programs,” the board said in a written statement. “In one investment called the BitConnect Lending Program, investors purchase BitConnect Coins, which are provided to a ‘BitConnect Trading Bot’ to generate returns as high as 40 percent a month.”
Mainstream interest in cryptocurrencies grew substantially in 2017 as the value of Bitcoin, the best known cryptocurrency, spiked in value by several thousand percent in recent years. It remains a speculative and highly volatile investment due to sudden, sharp price swings.
The board says BitConnect is not registered to sell securities in Texas and that the BitConnect investments are securities that are not registered, either.
“BitConnect has disclosed virtually nothing about its principals, financial condition, or strategies for earning profits for investors. It has not provided a physical address in England,” the board said. “Despite providing no information on how it will make money for investors – including the algorithms behind the Trading Bot – BitConnect is touting its investments as a ‘safe way to earn a high rate of return.’”
BitConnect did not immediately respond to an email message requesting comment Friday afternoon.
The board’s action comes four days before BitConnect is scheduled to hold an initial coin offering, or ICO, in the United States to raise money. It claims the company uses unregistered sales agents to target residents through website, social media and Craigslist.