The California Department of Financial Protection and Innovation (DFPI) filed termination orders against 11 unidentified crypto companies on Tuesday, September 27, 2022.
In a statement, the financial authority said, “Of the 11 companies accused of offering and selling unqualified securities, 10 each committed fundamental errors and neglected investors.”
The regulator added that the previous plan also targeted potential investors who offer high-yield investment products in other sectors, such as oil and gas.
The enforcement action comes a day after California joined a string of states to accuse cryptocurrency lender Nexo of making profit-making products in violation of securities laws.
Regulators have even questioned companies, including those offering Ponzi scams, without actually offering any investment products.
In a statement, the department said: “All companies are suspected of using investor funds to pay claimed profits to other investors through Ponzi fraud. Each company also has a referral program operating through a pyramid scheme.”
These companies promise to pay commissions to their investors if they are successful in recruiting new investors. Even early investors will receive additional bonuses when invited investors are able to recruit other new investors.
The department announced that “this program will achieve the desired effect and encourage investors to create and publish content on social media sites such as YouTube, thereby encouraging others to invest in this business.”
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Previously, JPMorgan Chase CEO Jamie Dimon said in a US Congressional hearing that cryptographic tokens like Bitcoin are decentralized Ponzi scams. He told lawmakers that he was very skeptical about cryptocurrencies.
“I am very skeptical of crypto tokens that I call currencies like Bitcoin. They are decentralized Ponzi scams,” Dimon said on Friday (23 September 2022), citing Bitcoin.com.
The CEO of JPMorgan continues to point out that billions of dollars are lost every year through cryptocurrencies, linking it to crimes such as ransom payments, money laundering, prostitution, and theft. He stressed that encryption is ‘dangerous’.
The JPMorgan CEO also talked about the stablecoin, which he said would be fine with proper regulation.
“There’s nothing wrong with properly regulated stablecoins like money market funds,” Dimon said.
Regarding blockchain, he confirmed that JPMorgan is a big user of blockchain. Dimon, a longtime Bitcoin skeptic, has repeatedly warned investors to be careful when investing in cryptocurrencies.
He always warned that they had no intrinsic value. He previously said that Bitcoin has no value and questioned the limited supply of BTC.
However, the CEO of JPMorgan has repeatedly said that innovations like blockchain and DeFi are real. In May, global investment banks said they would increase the use of blockchain in finance.
JPMorgan, on the other hand, offers several crypto-related investments, has its own JPM coin, and has a lounge on the Metaverse. JP Morgan analysts are also more optimistic about bitcoin and cryptocurrencies than bank CEOs.
In May, JPMorgan analyst Nikolaos Panigerzoglu revealed that the bank had turned real estate into digital assets, along with hedge funds, as the preferred alternative asset class.
Previously, cryptocurrency fraud was reported as one of the most common cyber breaches in Hong Kong in the first half of 2022, involving 25% of digital assets.
This number of scams can be explained by the growing interest in cryptocurrencies among many Hong Kong residents. A recent study ranked the region as one of the most widely used cryptocurrencies in the world.
According to the South China Morning Post, there were 10,613 cyberattacks in Hong Kong from early January to late June this year. 798 is a scam involving a 105% increase in cryptocurrency when considering the same period in 2021.
Criminals have spent HK$387.9 million (about US$50 million or Rs 744.61 billion, assuming an exchange rate of US$14,892) from digital asset companies and individuals in Hong Kong, which amounted to US$21 million or 312 million. This is a significant increase compared to Rs. In the first half of 2021, $1 billion was stolen.
One of the victims was Van, a 30-year-old woman who runs a money changer in the area.
A few months ago he received a message on WhatsApp from an unknown person introducing himself as the head of the digital asset platform. Criminals persuaded him to invest around $280,000 in Tether (USDT).
“The first 4 transactions on the Tether [cryptocurrency] exchange went smoothly. The victim received HK$2.7 million, including the exchange service provided to the scammer. At that time, the scammer won the victim’s trust.” Sunday, July 8, 2022, citing Cryptopotato.
However, after a while, the perpetrator advised Fan to transfer the accumulated profits to a cryptocurrency wallet. Needless to say, he was unable to access the assets while the scammers stopped communicating with him.
Hong Kong police also determined that fraud involving digital assets was one of the top three frauds in Hong Kong in the first half of 2022. The other two are job fraud and online shopping activity fraud.
The surge in cryptocurrency-related fraud in Hong Kong may be due to the recent increase in demand for digital assets shown by residents.
According to a survey conducted last month, China’s SAR ranks as the world’s most favored country for cryptocurrencies.
Number one is the result of a combination of factors, including the government’s favorable attitude towards the industry, the number of cryptocurrency ATMs and interest in the sector per capita.
The United States, the world’s largest economy, ranked second, and Switzerland, Europe’s financial center, ranked third.