The Bureau of Securities in New Jersey recently alleged that tokens Zoptax and Unocall are fraudulent, unregistered securities offerings. The Bureau issued stop orders to both companies, demanding that they stop their ICOs immediately.
The orders were announced in a press release by the office of the Attorney-General of New Jersey on August 7th.
The investigations into Zoptax and Unocall come as part of Operation Cryptosweep, described as “an international crackdown on fraudulent Initial Coin Offerings (“ICOs”) and crypto currency-related investment schemes”. The operation was launched by the North American Securities Administrators Association (NASAA) in April of 2018.
Operation Cryptosweep comes as part of a joint effort between state and provincial securities regulators in the US and Canada. NASAA stated in August of 2018 that the operation had investigated over 200 ICOs in its first four months of activity.
The report states that Zoptax is offering its cryptocurrency Zoptax Coins through an ICO over its website. The website states that the ICO has a soft cap of $500 thousand USD, and a hard cap financing goal of $3.4 million.
The Bureau affirms that not only is Zoptax breaking the law by not registering as a security, but that Zoptax advertised “materially false and misleading statements and/or omitting to state material facts in connection with the offer and sale of its securities.” The aforementioned statements include the allocation of ICO funds, information on the entities creating Zoptax, and the company’s physical address.
Similarly, the Bureau found Unocall to be offering unregistered securities to investors through its website-based ICO. The report from the Bureau states that Unocall is attempting to build an ecosystem that will offer users the opportunity to purchase Unocall tokens, altcoins, as well as fiat currencies through the UNOpay mobile wallet. In addition to the ICO, the website offers prospective investors a guaranteed interest of 0.18-0.88% per day through its “Staking Program”. The Bureau found Unocall to be violating the law in the same manner as Zoptax.
Bureau Chief Christopher Gerold issued a statement linking the recent popularity of crypto in media to the increase in ICOs, particularly fraudulent ones:
With the price of Bitcoin increasing over the last few months and the announcement of Facebook’s Libra, there has been a sharp increase in public solicitations to invest in crypto-related products that appear on their face to be suspect. The two actions today are a reminder to investors that investing in cryptocurrencies or crypto-related products have significant risks and investors must do their diligence before investing.
While Operation Cryptosweep may seem like an attack on crypto at a superficial level, the program targets only unregistered, fraudulent ICOs. The reality is that the program encourages the legitimization of cryptocurrency through the removal of fraudulent ICOs. While the tide of public opinion is slowly turning in favour of crypto, the perception of cryptocurrencies as fraudulent and of dubious intent must be quashed, should we wish to see more mainstream crypto usage in the future.