Alabama Securities Watchdog Hits 3 ICOs with Cease-and-Desists

The U.S. state of Alabama has issued cease-and-desist orders to three ICOs that were allegedly soliciting residents with unregistered securities.

May 25, 2018 at 9:00 a.m. UTC
Updated Sep 13, 2021 at 7:59 a.m. UTC

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.

Furthermore, the ASC has also tackled two other token sale projects, named LEV and Platinum, with cease-and-desist orders entered on May 2 and May 18, respectively.

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.

The ASC actions also follow its counterparts in other U.S. states such as Texas and New Jersey that have recently stepped up their efforts in scrutinizing and red-lighting cryptocurrency projects that are soliciting investments locally.

 Alabama map image via Shutterstock

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