One month after taking aim at Dubai-based USI-Tech for its advertisements targeting Texas residents for bitcoin investments, the Texas State Securities Board (TSSB) issued an emergency cease-and-desist order against Hong Kong-based firm dubbed R2B Coin. The Texas regulators say that the company is issuing unregistered securities to its residents with disingenuous information.
The state agency said that R2B Coin is promoting “misleading and deceptive” information, which falls under the definition of securities, on its website. R2B Coin is in its first phase of the pre-trade sales period, and is selling R2B Coin, which it dubs “the Asian currency” to investors, asserting, “This is your chance to make the purchase of your lifetime”. According to the R2B website, its R2B Coin will have an offering price ranging from $0.008 to $188. It also states, “it is expected that R2B Coins will reach $200 within three months after the start of trading, and will be among top 10 currencies in 1–1.5 years.”
The company is aggressively targeting those who are not usually financial investors, making promises such as, “R2B Coin disrupts the financial world by enabling everyone to become part of it”. They also claim, “R2B Coin is the most stable digital currency in the world based on MLM” and “R2B Coin has become recognized as one of the leading cryptocurrencies in the world”.
The company’s website depicts its managers as David Wu, the Asian Marketing Director and Eddie Lo, the Business Director and describes itself as a “licensed global firm” and a “licensed securities dealer”. In its cease-and-desist letter, TSSB says R2B Coin is not registered in Texas or with the Financial Industry Regulatory Authority (FINRA). Therefore by soliciting Texan investors, including via a series of “USA conference calls” hosted by representatives of R2B Coin, the firm has violated securities regulations in the state. They are also seeking Texas residents to act as dealers or agents of the firm who are not registered as such.
The Texan regulators also say that the company has misleadingly promoted its potential by making misleading statements, such as having investors participating in the project from around the world, including the U.S., Italy and India; and stating that investors can swap their tokens for public stocks at Hong Kong or New York currency exchanges. Furthermore, R2B Coin is requiring investors to enter a legal contract on investing, which states that “past performance does not guarantee you future success” and that there is “no guarantee about the future value” of R2B Coin. The TSSB states that R2B Coin is “intentionally failing to disclose its assets, liabilities and other financial information necessary for investors to assess the risks associated with purchasing R2B coins”, that “R2B Coin alone is now setting the price of R2B Coin” and that the firm “is intentionally failing to disclose the identity and qualifications of its principals”.
The TSSB has given R2B Coin 31 days to file an appeal following the emergency order for it to halt its targeting of Texas residents after which it may be subject to a fine of not more than $5,000 or imprisonment for not more than two years, or both. The firm has not responded to press for comments.
The cease-and-desist order marks the state’s third against international cryptocurrencies since December 2017.