2018
The Texas Securities Commissioner last week brought an emergency action against cryptocurrency firm LeadInvest, an offshore entity that claims it is advised by Supreme Court Justice Ruth Bader Ginsburg and three former U.S. Solicitors General.
Commissioner Travis J. Iles entered the Emergency Cease and Desist Order Feb. 26 against LeadInvest to stop its fraudulent offers of various investments, including one tied to a cryptocurrency mining program in Iceland.
LeadInvest was using public advertisements to lure Texans to its website, which contained profiles and photographs that purported to depict its team, advisors and legal professionals.
A photograph of LeadInvest’s legal professionals portrays Justice and former Solicitors General Theodore Olson, Paul Clement and Seth Waxman. The photograph was first printed in the Fall 2005 edition of the GW Law Briefs, a publication of the George Washington University Law School.
The order alleges that LeadInvest is deceiving the public through its use of the photograph to tout its legitimacy.
The agency’s Enforcement Division determined that some of these images are stock photographs of models sold on the internet. Other photographs are actually images from unrelated websites that depict an attorney licensed to practice in Texas, and attorney licensed to practice in North Carolina, and a law firm based in California.
“The Internet provides a means for bad actors to conceal their identity or, perhaps even worse, misappropriate the identity of others,” said Commissioner Iles. “Now, more than ever, investors need to conduct due diligence to verify the identity of promoters of online investment programs and determine whether they are telling the truth about their operations.”
The appropriation of the likeness of others has been an ongoing concern for securities regulators.
In 2017 the Securities Commissioner entered an emergency action against two investment promoters, Raymond Hill and Mark Diaz, who were offering securities while falsely claiming to be a federally registered investment advisory firm in Dallas.
The emergency action also alleges that LeadInvest is illegally and fraudulently offering at least three different investment programs.
One program offers investments tied to what LeadInvest calls its “own Green energy Bitcoin Mining Farm build [sic] out in Iceland.” The LeadInvest website represents that a person who invests $1,000 in something called a “1 Month Miner” will receive approximately $1,204 in 30 days.
In addition to the cryptocurrency mining program, LeadInvest was offering Texans the opportunity to have one of more than 40 “specialists” manage their principal. A third investment is based on lending money to LeadInvest in return for interest payments.
A key red flag was that LeadInvest was not registered as a dealer, and its securities are not registered for sale in Texas.
“The registration laws are designed to protect investors,” Commissioner Iles said. “Main Street investors should only do business with securities dealers who are registered, and registering with the State Securities Board involves testing requirements, background checks, and periodic inspections of books and records.”
LeadInvest has 30 days after receipt of the order to challenge it. In the meantime, the emergency action remains in full force and effect.