While nothing has emerged from the SEC yet regarding fraudulent ICO lending Ponzi schemes, Texas is on a roll.

An emergency cease and desist order against DavorCoin marks the third enforcement order Texas has taken against ICO lending Ponzi schemes.

For those unfamiliar with the scheme, DavorCoin is a BitConnect ICO lending Ponzi clone.

The gist of the model sees anonymous admins launch an ICO, take in real money on the promise of a monthly ROI (paid out of invested funds) and eventually do a runner when withdrawals exceed new investment.

BitConnect’s recent collapse resulted in widespread investor losses.

DavorCoin was heavily touted as a reload scam in the wake of BitConnect’s collapse.

Sadly for those gullible enough to fall for the same scam twice, investment in  DavorCoin has only resulted in bigger losses.

After hitting a brief pump spike of about $160 shortly after launch, DAV has since collapsed to around $5.

Texas’ cease and desist, issued on February 2nd, accuses DavorCoin of ‘illegally and fraudulently offering investments in a cryptocurrency lending program in Texas‘.

Citing their January 4th cease and desist against BitConnect, the Texas Securities Board acknowledges DavorCoin’s response.

On January 16, 2018, DavorCoin responded by announcing that “[t]his does not change anything for us” and that DavorCoin is now “the number one lending platform in the world!!”

DavorCoin also responded by announcing DavorCoin is “now the new standard… Many people are going to join us, the price will increase and all you already in the game with us will benefit from it”.

As with BitConnect and R2B Coin, DavorCoin is accused of illegally offering unregistered securities within Texas.

The investments in the DavorCoin lending program have not been registered by qualification, notification or coordination, and no permit has been granted for their sale in Texas.

DavorCoin has not been registered with the Securities Commissioner as a dealer or agent at any time material hereto.

The Texas Securities Board goes onto cite the following examples as evidence of DavorCoin’s ongoing fraudulent operations:

  • intentional failure to disclose the identity of DavorCoin’s principals
  • intentional failure to disclose DavorCoin’s principal place of business
  • intentional failure to disclose DavorCoin’s assets, liabilities and other financial information about its business
  • intentional failure to disclose the manner in which DavorCoin uses DAV tended by investors to generate a profit

The Securities Board has ordered DavorCoin immediately cease and desist from

  • offering for sale any security in Texas
  • acting as a securities dealer in Texas
  • engaging in any fraud in connection with the offer for sale of any security in Texas
  • offering securities in Texas through an offer containing a statement that is materially misleading or otherwise likely to deceive the public

DavorCoin and its affiliates face two years in prison and fines of up to $5000 if they fail to comply.

The company has until March 5th to respond to the order, after which it will become final (ie. DavorCoin will be certified illegal in Texas).

Thus far none of the MLM companies recently served by the Texas Securities Board have responded to cease and desists issued against them.

USI-Tech ignored the cease and desist and has calimed it is going to reopen in the US anyway.

BitConnect, which was already showing signs of a collapse, responded by shutting down.

R2B Coin, which dubs itself as “the Asian Currency”, responded by taking their website offline (“under maintenance”).