Phony Managers and Fake Clients: Order Stops Crypto Fraud Disguised as Legitimate Investment

Jun 5

Texas Securities Commissioner Travis J. Iles entered an Emergency Cease and Desist Order against Coinvaultpro, accusing it of illegally and fraudulently offering cryptocurrency mining investments to Texas residents.

According to the order, investors can register accounts through Coinvaultpro’s website and purchase the investments online.  In exchange, Coinvaultpro is promising to pay lucrative fixed profits, with the rate of return dependent on the principal investment, according to the order.  The investments are purportedly insured and guaranteed.

Coinvaultpro is accused of concealing material information about its strategy for generating and guaranteeing the returns and insuring the cryptocurrency mining investments.  It is also failing to disclose considerable risks to investors, according to the order. 

Although the investment details may be scarce, a key feature is the purported strength of Coinvaultpro’s management team.  Coinvaultpro is allegedly touting their expertise and highlighting their prior experience with “top tech and finance companies.”  It claims its managers previously worked for Google, Amazon, Morgan Stanley and Barclays, according to the order.

Another key feature is the purported satisfaction of its clients, as Coinvaultpro is allegedly publishing testimonials on its website.

These features are facades, according to the order.  Coinvaultpro is accused of misrepresenting the identities of its principals and clients and using stock photographs to depict their likenesses.    

Coinvaultpro is also allegedly misleading investors by claiming to have a license to deal in the cryptocurrency mining investments.  According to the order, Coinvaultpro is not registered to sell securities in Texas, and the cryptocurrency investments are not registered or permitted for sale in Texas. 

Commissioner Iles reminds investors to investigate before they invest.  “Promoters of fraudulent investments often go to great lengths to create the appearance of legitimacy,” he said.  “Investors can use due diligence to uncover their schemes and stay one step ahead of their scams.”

In September 2017, the Texas Securities Board became the first state securities regulator to enter an order against a promoter of a fraudulent cryptocurrency investment scheme.  The agency has now brought a total of 27 enforcement actions against 77 respondents accused of illegally, fraudulently or deceptively offering cryptocurrency investments to Texas investors.