By CCN Markets: Crypto fraudsters beware. Texas’ top securities chief is watching you like a hawk, and he’s not a fan of your scammy ICO. ...
By CCN Markets: Crypto fraudsters beware. Texas’ top securities chief is watching you like a hawk, and he’s not a fan of your scammy ICO. He’s Joe Rotunda, Director of the Enforcement Division for the Texas State Securities Board. He’s held the position for the…
By CCN Markets: Crypto fraudsters beware. Texas’ top securities chief is watching you like a hawk, and he’s not a fan of your scammy ICO.
He’s Joe Rotunda, Director of the Enforcement Division for the Texas State Securities Board. He’s held the position for the last 12 years.
Rotunda is easy-going, even humorous at times. However, he’s the epitome of the saying, “Don’t take his kindness as a weakness.” Rotunda has no patience for fraudsters, and his zealousness against ICO scammers is earning him quite a reputation.
Rotunda coordinated an international task force that focused on illegal and fraudulent ICOs and cryptocurrency investments. His effort has resulted in the involvement of more than 40 agencies that brought more than 46 enforcement actions against promoters of illegal or fraudulent cryptocurrencies.
Including the infamous Bitconnect scam.
“The actions brought against Bitconnect highlight the effectiveness of our cooperation – both Texas and North Carolina brought enforcement actions against Bitconnect at a time the market capitalization of its tokens was around $2.6 billion, and these actions led the total collapse of the scheme,” he said.
But that hasn’t stopped the scammers from targeting Texas residents. Rotunda explained why in an exclusive interview with CCN:
“Bad actors have a simple goal: raise as much money from as many investors as quickly as possible. They are able to leverage the internet, social media, online marketplaces and other mediums to broadly target these investors with little cost or effort. Their schemes often collapse as soon as a state or federal regulator brings a legal action against them. So, state and federal regulators need to continue to be proactive to stop the schemes before bad actors are able to accomplish their goal.”
Rotunda said that hasn’t really seen a falloff of scams, despite the waning of Bitcoin enthusiasm during 2018’s “Crypto Winter.” He’s noticed that when the price of cryptocurrencies increases, bad actors promote even more new cryptocurrency schemes.
At that point, state regulators need to be proactive.
“We know that bad actors leveraged widespread interest in cryptocurrencies in late 2017, and earlier this year we quickly realized they were again leveraging renewed interest in the increase in price of bitcoin.
The flip side of the coin – no pun intended, I think – when the price of cryptocurrencies decreases, schemes often collapse, and investors complain to our agencies. State regulators field these complaints and investigate the collapsed offerings and pursue appropriate enforcement actions.”
However, Rotunda stressed that he’s not out to annihilate the ICO, the vehicle through which so many of these fraudulent schemes operate. When asked if he could eliminate the fundraising model entirely, he said:
“No. Can I just say “no?” Does that work?”
He went on to answer:
“Seriously, some of our best cases and most important work are not reflected in our enforcement actions. We work with businesses to address deficiencies and ensure they’re able to raise capital while complying with the law. In other words, we’re not filing enforcement actions against these companies. These companies are addressing the legal issues, getting into compliance with the law, and moving forward with their operations. These results are not reflected in public enforcement actions, but they’re an important component of work in ensuring that businesses can raise capital while protecting the interests of the public.”
In 2018, The Texas Securities Commissioner brought an emergency action against cryptocurrency firm LeadInvest, an offshore entity that falsely claimed it advised Supreme Court Justice Ruth Bader Ginsburg and three former U.S. Solicitors General.
That same year, Bitconnect shut down. Rotunda pointed out after that happened, another project called Davorcoin announced “[t]his does not change anything for us” and that Davorcoin is now “the number one lending platform in the world!”
That was a red flag.
“We recognized that Davorcoin was attempting to attract defrauded Bitconnect investors. We entered an order against Davorcoin on February 2, 2018, and Davorcoin shut down shortly thereafter. Moral of the story: don’t publicly announce when going to defraud investors previously defrauded by a different fraudster. “
Rotunda said that he once almost bought some bitcoin but that he has made a principled decision to avoid holding any crypto assets.
“I’m a little concerned that my ownership of cryptocurrencies may create a perceived conflict of interest. For example, if I owned a particular cryptocurrency, the public may think I’m taking a particular enforcement action or not taking a particular enforcement action because I want my cryptocurrency to increase in price.”
I’ve come close to purchasing bitcoin, and I played around with the first bitcoin ATM in the United States. It was placed at the HandleBar in Austin, Texas, about six city blocks from my office. I’m just concerned about the public perception – I don’t want anyone to think that I’m making decisions to increase the price of my own cryptocurrency.”
Last modified: January 10, 2020 3:11 PM UTC