North Dakota has issued a cease and desist order against a company that claims it offers security services for cryptocurrency.
State Securities Commissioner Karen Tyler announced the order Monday against Union Bank Payment Coin (UBPC), accusing the company of "promoting unregistered and potentially fraudulent securities in North Dakota in the form of an initial coin offering (ICO), a financing method used by startups to raise funds, according to a news release. Companies create virtual coins or tokens to sell online to investors through ICOs in exchange for crypto- or fiat currency, the release said.
"Because ICOs are sold over the internet and pitched heavily through social media platforms, North Dakotans can be exposed to the offers whether the promoter is down the street or on the other side of the globe," Tyler said in a statement. "Financial criminals continue to cash in on the hype and excitement around blockchain, crypto assets, and ICOs-investors should be exceedingly cautious when considering a related investment."
UBPC stated it wanted to become the "world's first security token backed by a fully licensed bank," but the North Dakota Securities Department claims the company is attempting to fraudulently acquire funds by exploiting an announcement by Union Bank AG, a bank in the European country of Liechtenstein.
"The (UBPC) website further indicates that the Union Bank Payment Coin ... is a 'security token offering' that is invested in as a tool or mechanism "designed to store wealth by utilizing income-producing digital assets," the release said. "The company also represents it is issuing a 'stable coin that is fully backed by a fiat currency-the Swiss franc.' "
The order came after the state set up an ICO Task Force through Tyler's office in an effort to identify investments related to cryptocurrency that pose risks to North Dakotans, the release said. It's also part of Operation Cryptosweep, a multi-jurisdiction investigation that include agencies from 40 U.S. and Canadian securities regulators.
Cryptocurrency is a digital asset that can be used to exchange goods on the internet.
This isn't the first order issued by the state against a company offering cryptocurrency services. The Securities Department issued similar order in October against Crystal Token, Advertiza Holdings (Pty) and Life Cross Coin, also known as LifecrosscoinGmbH.