Nui fined $25,000 for securities fraud in Texas
The state of Texas has slapped Nui with a $25,000 securities fraud fine.
The company has also agreed to cease offering unregistered securities to Texas residents.
Back in July 2018, the Texas Securities Board issued Nui with a securities fraud cease and desist.
The TSSB alleged that through Symatri, Kala and Mintage Mining, Nui was
illegally and fraudulently offering investors a third investment in cryptocurrency where investors own and possess pre-configured hardware that passively mines Kala.
In response to the notice, Nui vowed to “vigorously defend” the TSSB’s allegations. CEO Darren Olayan followed up by claiming securities regulation didn’t exist.
Turns out Nui wasn’t able to defend the allegations, and securities regulation of cryptocurrency MLM companies very much exists.
The TSSB identified Nui’s “hash rate unit investment” and “open-ended unit investment” programs as an illegal unregistered securities offerings.
Mintage Mining, BC Holdings and Investments and Nui Social were offering investments referred to as “Hash Rate Units” and “3-year hash rate share” investments.
Nui could have “vigorously defended” the cease and desist by challenging the legality of unregistered securities.
Instead the company capitulated and ‘represented to the Enforcement Division that they stopped offering‘ the Hash Rate Unit Investment and Open-Ended Unit Investment programs ‘to Texas Residents upon service of the Emergency Cease and Desist Order‘.
A hearing had also been scheduled for February 20th, at which Nui would have been able to put forth its argument that unregistered securities are legal.
Again instead of following through, Nui opted to settle the case with the TSSB.
As per the TSSB order, Nui has consented to the following conclusions of law:
- Both the Hash Rate Unit and Open-Ended Unit investment programs were securities;
- Neither program was registered with the Texas Securities Commissioner; and
- by failing to register the investment programs, Nui violated the Texas Securities Act.
Nui are further prohibited from offering any security in Texas unless it is registered with the Securities Commissioner or qualifies for exemption.
The company will also pay a $25,000 administrative fine.
Additionally as part of the settlement Nui ‘are offering rescission to Texas residents‘.
I believe this is a full refund on invested amounts, likely sans any withdrawn returns.
Unfortunately Nui investors who have suffered losses in other states or elsewhere in the world remain screwed.
What should be eye-opening for existing and prospective Nui affiliate investors, is why the company still hasn’t registered with the TSSB or federally with SEC.
If Nui’s investment offerings were above-board internally, there wasn’t anything illegal with what they were doing.
Of course by registering with the TSSB and/or SEC Nui would have to provide investors with informative disclosures.
These disclosures are binding and carry legal consequences if Nui misrepresents what it’s doing to regulators, so I suppose there’s that.
I’ll leave why Nui might not want to be transparent with regulators and its investors up to you.
In their own response to the $25,000 fine and finding that Nui was offering unregistered securities in Texas, the company stated;
We could have proceeded to a hearing to have a neutral arbitrator decide who was right.
But we recently decided that it is in the best interest of our business and our Affiliates to settle the issue directly with the TSSB and move on.
Going forward, we have made a business decision to not offer any cryptocurrency mining products to Texas residents and we ask our Affiliates to not solicit Texas residents.
The agreed order does not discuss or affect either Kala coins or Kala mining.
However, Nui has determined that it is in the company’s and Nui’s affiliates’ best interest to stop offering all products in Texas.
Pending regulatory action in other states or from the SEC at a federal level, Nui will continue to illegally offer unregistered securities to US residents.
The company’s response also erroneously claims Nui was “cleared of all fraudulent allegations”.
Was Nui cleared of all fraudulent allegations?
Yes. The emergency order that Texas issued last year contained allegations of fraud that Nui vehemently denies.
While it is true the word “fraud” doesn’t appear in the TSSB’s February 21st order, violations of securities law constitutes securities fraud.
The fact of the matter is Nui committed securities fraud in Texas, got caught and has to pay a $25,000 fine.
Rather than register their securities offerings in Texas and continue to operate legally, the company has instead decided to stop operating in Texas.
There’s no sugar coating it. It is what it is.
First off, the Texas State Securities Board (TSSB) only had the power to fine Nui and prohibit them from continuing to violate securities laws in the state of Texas.
Done and done.
Yet Nui boasts about their “Successful” resolution to the Texas C&D by paying a fine and “making a business decision” not to sell any crypto investments in the state of Texas.
One or two further successes of the kind and they’ll be undone.
Further, Nui is making great shakes that the two named investment products, the open ended and fixed rate hash units are the only things mentioned in the Texas ruling and they stopped selling those months ago.
Of course they did, now they’re selling giga and tera hash mining contracts but they aren’t selling them in Texas (or three other states). How does this speak to Nui’s confidence in the legality of their more recent products?
I am not surprised that Nui is trying to spin this ruling as some sort of success, after all outside of admitting the truth what other choice did they have. They were after all touting themselves as “precompliant” and “compliant when it’s time to be compliant.” They weren’t either of those things and they still aren’t.
Their capitulation in Texas proves that.
Texas based Nui affiliates, be prepared to hold Nui’s feet to the fire as far as rescissions and/or refunds. If they impose unfair terms or refuse to make good for your losses don’t fear, the refunds are mandated in Nui’s deal with the TSSB.
Give Nui fair time to make things right and if they fail to do so, report them to the TSSB.
The sticking point for me is Nui’s refusal to register their investment opportunity.
“If everything is aboveboard, why don’t you just register so you can operate legally?”
“Because running away makes us look more legitimate…”
If refunds are honored, it’s going to cost Nui a lot more than $25,000 plus SEC/TSSB registration.
Why would a legitimate business opportunity opt to incur unnecessary expenses and voluntarily lose investors?
Nui maintains the trappings of respectability insofar as network marketing standards go but if you watch them long enough and listen closely enough, they are a MLM underbelly opp start to finish.
They can not and will not register their offerings with any state or federal regulatory body quite simply because it’s impossible for them to withstand that sort of scrutiny.
Kala coin doesn’t have an articulable business plan that doesn’t include some form of “then a miracle happens” to increase it’s perceived value and while history shows that MLeMmings will fall for that pitch in numbers, securities regulators won’t.
That’s why Nui has to sell capitulation as some form of success. They know their days are numbered, either the law catches up to them or the laws of mathematics will.
All the while Nui grows more cult like. Big upline leader John Johnson cautions his followers:
Don’t trouble your little heads thinking about this, just read the company PR and be blissfully happy. It’s so much easier than thinking for yourselves and it saves him the effort of deleting any insufficiently faithful posts.
That is how far Nui has fallen, information and expectation control. Who cares if the price of Kala falls below 2 cents (as it has on the internal exchange), keep paying for giga and terahash investments (and monthly fees) and you’ll have so many Kala that you’ll still come out ahead.
That’s where the laws of mathematics come in, if 2cent Kala falls to 1cent but suddenly you have 10 (or 50) times as many coins, what does the price per coin do? But you can always “mine” more.
The spin from nui..
We included Nui’s response toward the end of the article.