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.
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I believe this is a full refund on invested amounts, likely sans any withdrawn returns.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.