On Tuesday, September 27th, the California Department of Financial Protection and Innovation (DFPI) ordered the closure of 11 unknown cryptocurrency companies for taking customers’ money without permission and violating state securities laws.
Furthermore, the regulator questioned whether companies such as Elevate Pass LLC and Metafi Yielders provided the services they claimed to offer.
In a press release, the regulator said, “Each of the 11 entities allegedly offered and sold unqualified securities, and 10 of them also made material misrepresentations and omissions to investors.”
According to the regulator, previous schemes targeted investors by offering high-yield investment products in the oil and gas sectors.
According to the press release, “The entities are all alleged to have used investor funds to pay purported profits to other investors, in the manner of a Ponzi scheme. Furthermore, each of the entities had a referral program that operated in the manner of a pyramid scheme.
The entities promised to pay investors commissions if they recruited new investors and additional commissions if the investors that they recruited, in turn, recruited new investors. The referral programs achieved their desired effect, incentivizing investors to create and post content to social media websites, such as YouTube, to entice others to invest in these entities.”
The actions were enforced a day after California joined a group of states in suing cryptocurrency lender Nexo, alleging that its “Earn” product violated securities laws.
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