Regulation
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The California authorities have begun persecution of crypto-companies operating under the financial pyramid scheme.
The California Department of Financial Protection and Innovation (DFPI) has launched a crackdown on companies dealing in cryptocurrency assets. The DFPI has issued refrain orders from 11 organizations that violate California securities laws. The state regulator announced that these companies are accused of using pyramid schemes.
According to officials, all of the targeted organizations used investor funds to pay out alleged profits to other investors:
“Each of the organizations had a referral program that worked like a financial pyramid: the organizations promised to pay commissions to investors if they attracted new investors, and additional commissions if the attracted investors, in turn, attracted new investors. And so on”.
It all started with crypto lender Nexo. The DFPI accused the company of selling non-qualifying securities in the form of invoices for interest income products starting in June 2020. As for 11 other companies, they, according to the regulator, offered classic high-yield investment programs, thereby trying to attract investors.
“We will continue to protect the interests of California consumers and investors from cryptocurrency scams. Our actions will help not only protect consumers, but also establish the state as the best place to do crypto business,” said DFPI Commissioner Clothilde Hewlett.
Previously, the California Assembly of Deputies did not support a bill to regulate digital assets for the US South Coast, similar to the New York BitLicense.
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