Texas authorities have ordered Automated Web Services (AWS) mining, an Australian cryptocurrency mining firm, to refund its investors. The company had guaranteed its investors a 200 percent return on the purchase of Cryptocurrency Mining Power (CMP) contracts. The company, however, failed to register the program with the state’s Security Commissioner first, thereby selling an unregistered and illegal security.
According to the Texas State Security Board, AWS violated the law by offering its contracts without registration and making misleading statements that deceived investors. And according to the order, the company will be forced to repay all 19 Texas-based investors to the full extent of their investments.
AWS mining, also known as MyCoinDeal, reportedly mines cryptocurrency at its farms in China, Russia, and Paraguay. Investors were required to use the wallet issued by the company to participate in all CMP-related contracts. It also charged investors exorbitant fees, including 2 percent on all fiat deposits and withdrawals, and 0.5 to 1 percent for all cryptocurrency-related transactions. The company, however, promised daily returns in Bitcoin (BTC) to its investors.
Each CMP contract was initially sold for $400. While investors were guaranteed a 200 percent return on their purchases, the company later said that users would have to shoulder the risks of cryptocurrency volatility and price fluctuations. Other risks mentioned in the company’s disclaimer included technical failure and changes in the price of electricity used to power the hardware. After receiving the emergency cease and desist order in November last year, the company stopped offering CMP contracts to Texas residents.
AWS: A Multi-Level Marketing Scheme?
According to the emergency action ordered by the Texas Securities Commissioner, AWS was illegally recruiting sales agents through social media portals such as LinkedIn and Facebook. The company used a multi-level marketing system, run by Pennsylvania-based AWS Affiliate to recruit sales agents and sell CMP contracts. The securities board concluded that AWS mining and its affiliates engaged in ”illegal, fraudulent, deceptive, and/or misleading practices in their business activities.”
Earlier this year, Travis J. Iles, the Texas Securities Commissioner filed three cease and desist orders against promoters of fraudulent cryptocurrency schemes. These individuals reportedly attempted to defraud Texas residents using “work from home” forums on Facebook. The first two promoters, Mikhail Rania Safia and Madeline O’Farrell, promised investors lucrative profits from trading cryptocurrencies. The third promoter, Tint X Mining, offered investors high returns through Bitcoin mining.
Have you or anyone close to you been defrauded by a similar illegitimate cryptocurrency scheme? Let us know in the comments below.