Texas Securities Commissioner Travis J. Iles entered an Emergency Cease and Desist Order Jan. 24 against R2B Coin, a Hong Kong-based company selling investments tied to a cryptocurrency called r2b coin, promising investors that the digital currency will soon be one of the world’s most valuable.
The emergency order is the third one entered against a company offering cryptocurrency-based investments. In December 2017, Texas became the first state securities regulator to issue an administrative order against a cryptocurrency promoter and followed with a second order on Jan. 4.
According to the Enforcement Division staff of the State Securities Board, R2B Coin, represents to potential investors that the distributor of the coin, Williams Corp. Ltd., is a “licensed global firm and “licensed securities dealer” based in Hong Kong and Dubai.
Williams Corp. has never been registered to sell securities in Texas.
The company claims that it will soon secure a listing on a major stock exchange, citing as possibilities the Seng Exchange in Hong Kong, the London Stock Exchange, and the NASDAQ, and that investors will be able to trade their tokens for stock.
For now, the company is inviting investors to invest in r2b coin during a “pre-sales” period expected to last between three and four months. R2B has referred to its coin as “gold nest eggs” and told individuals that “the more you can afford to spend the more your life will change.”
According to the Enforcement Division staff of the State Securities Board, R2B Coin is telling prospective investors that the r2b coin “will never go down in value,” unlike the price volatility of established cryptocurrencies like Bitcoin and Ethereum.
The contract R2B requires of investors, however, says the company does not guarantee the future value of investments.
R2B Coin’s business model is based in part on recruiting sales agents to recruit investors in a multi-level marketing scheme. The company refers to sales agents as affiliates and pay them generous commissions. These affiliates have been using online advertisements to specifically target Texas residents and attempt to lure them into the scheme.
Despite R2B Coin’s optimistic projections, as recently as Jan. 18 the company has told investors of what it calls “growing pains.” R2B has said is attempting to fix problems with security for customer accounts and is rebuilding parts of the application investors use to invest.
The Enforcement Division staff found multiple violations of the Texas Securities Act, including:
The sale of securities by an unregistered firm, Williams Corp.;
R2B is allowing its affiliates to earn commissions by selling r2b coin without being registered to sell securities in Texas;
Failure to disclose the identity and qualifications of the principles of R2B Coin, and the company’s financial situation;
Failure to disclose the possibility of regulatory actions and technical problems that could hamper the company.
R2B Coin has 31 days to challenge the order at the State Office of Administrative Hearings.