California at War with Crypto Ponzi Schemes

The US state of California is going on the offensive against companies violating securities laws. As part of this, 11 cryptocurrency companies have been banned from operating by the Department of Financial Protection and Innovation (DFPI). Nine of them are accused of using Ponzi schemes without the knowledge of investors.

11 crypto scams busted in California

In an effort to protect California consumers from crypto scams, the Department of Financial Protection and Innovation (DFPI) has banned the operations of 11 companies claiming to work in crypto. They are Cryptos OTC Trading Platform Limited, Elevate Pass LLC, GreenCorp Investment LLC, Metafiyielders Pty Ltd, Pegasus, Polinur ME Limited, Remabit, Sity Trade, Sytrex Trade, Vexam Limited and World Over the Counter Limited.

They are charged with violating California securities laws. According to the DFPI’s statement, all of these companies operated investment programs that paid old investors with new investors’ funds.

Each of these entities had a referral program that operated like a pyramid scheme. The entities agreed to pay investors commissions if they recruited new investors, and additional commissions if the investors they recruited, in turn, recruited new investors. The referral programs achieved their desired effect, encouraging investors to create and post content on social media websites, such as YouTube, to encourage others to invest in these entities.

press release from DFPI

In addition, the companies that have been cracked down on are accused by the DFPI of making material misrepresentations and omissions to investors. They allegedly falsely claimed to be conducting trading activities for investors, developing a metaverse and having set up a decentralized exchange platform.

Efforts to clean up the crypto industry in California

The crackdown on these 11 companies comes as California attempts to regulate the crypto sector. In May 2022, the same state issued an executive order that strengthens consumer protection against fraudulent investment platforms.

One of the flagship measures of this piece of legislation is that it gives the DFPI jurisdiction to ensure compliance with financial laws, but also educate Californians about the benefits and risks associated with cryptocurrency.

According to the DFPI, tracking down these 11 online investment platforms is part of a law enforcement effort in California.

“DFPI will continue to protect California consumers and investors from cryptocurrency scams and fraud,” said Clothilde Hewlett, DFPI Commissioner.

The Department of Financial Protection and Innovation’s work in California is to be encouraged. It helps root out malicious actors from the crypto sector. Aggrieved consumers should continue to blow the whistle on fraudulent initiatives, as requested by the DFPI. This kind of effort is essential to cleaning up our industry, because yes, regulation is an essential component of our industry, but we still need to do it right…