The Alabama Securities Commission (ASC), the U.S. state's securities regulator, has joined its counterparts in Texas and New Jersey in taking action on initial coin offerings (ICOs) that are soliciting local residents.
According to a cease-and-desist order entered on May 2 and revealed yesterday, the agency has ordered purported cryptocurrency mining firm Extrabit to cease its token sale offering in the state.
The ASC alleged the firm has been illegally soliciting Alabama investors with what it considers an unregistered securities offering after it advertised its token sale on the website of WSFA, an NBC-affiliated TV station licensed in the state capital, Montgomery.
While currently the online ad appears to have been taken down, the agency said in the order that the firm originally claimed that investors in the pre-ICO phase could purchase Extrabit's token "EXB" at half price.
"To participate in the pre-sale, the user must invest $20,000 and after the purchase, the tokens will be sent to MyEtherWallet within 48 hours," the agency quoted the original ad as saying.
Further, Extrabit's white paper claims that, since the firm generates its profits mainly from mining bitcoin, zcash and monero, it promises a 185 percent return on investment every quarter for investors who maintain a positive balance in their EXB wallet.
As well as offering unregistered securities, the ASC said the project made "materially misleading" statements to defraud or deceive investors.
And Extrabit seems not to be the only token project that is targeting residents in Alabama. A Google search for "token sale" on the WSFA website currently comes up with over 200 press release-style ads from various ICO projects.
Like with Extrabit, the agency accused the two projects of selling unregistered securities in Alabama while making unrealistic promises to potential investors over the likely returns on investment.
Alabama map image via Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.