Despite reassurances by Nui that their Kala altcoin and Mintage Mining have “stability and protection with the SEC“, a US securities regulator has issued the company with a cease and desist.

The Texas Securities Board issued an emergency cease and desist notice to Nui on July 11th.

Named as respondents in the notice are Symatri LLC, Mintage Mining, BC Holdings and Investments LLC, Social Membership Network Holding LLC, Nui Social, Darren Olayan (right), William Douglas Whetsell and Wyatt McCullough (Nui affiliates).

As per the notice, the Securities Board alleges

(Darren) Olayan controls Mintage Mining.

Mintage Mining is illegally and fraudulently issuing and offering two different investments in cryptocurrency mining.

Olayan controls Symatri.

Symatri issued Kala, a new cryptocurrency, during a recent initial token offering.

Symatri, together with Mintage Mining, is illegally and fraudulently offering investors a third investment in cryptocurrency where investors own and possess pre-configured hardware that passively mines Kala.

In addition to claiming Mintage Mining was “pre-compliant” with the SEC, Nui and affiliates hedged the legality Kala on the law firm Jones Day.

Our legal representation includes the top law firms in the U.S., Latin America, and Asia.

Specifically, these law firms are specialized in cryptocurrency and are ready to stand by us.

They are on our advisory board and have partnered with us on the legal side.

Having the best cryptocurrency legal representation on the planet gives us and you the assurance that we’re in line with regulations and policies and are proficient in what we’re accomplishing.

Nui affiliates also used the law firm’s name to claim Mintage Mining’s unregistered security was legal in the US.

WOULD THE #1 RANKED LAW FIRM ASSOCIATE THEMSELVES WITH A CRYPTO-MINING COMPANY IF THEY THOUGHT FOR JUST ONE SECOND THE COMPANY THEY COUNSEL IS A SCAM???

Texas haven’t named Jones Day as a respondent in their cease and desist.

Not surprisingly however, paying lawyers doesn’t exempt you from US securities law.

In connection with the offer of investments in the Hash Rate Unit Investment Program and the Open-Ended Unit Investment Program, Mintage Mining, Social Membership Network Holding, Nui Social, Olayan, Whetsell and McCullough are intentionally failing to disclose material facts relating to Mintage Mining (and its principals), including

  • intentionally failing to disclose the identities of the principals of Mintage Mining
  • intentionally failing to disclose the principal place of business of Mintage Mining
  • intentionally failing to disclose the business repute and qualifications of Darren Olayan, as well as his experience as the CEO of Divvee.Social, Senior Consultant Country Opener of Mynt, Chief Business Development Officer of Sunera Solar, Country Opener for Jeunesse Global, Master Distributor for WakeUpNow, Partner for Brighton Equity Partners, Founder of Brighton Parking Systems and Business Owner for All-Star Mortgage and Realty
  • intentionally failing to disclose the assets liabilities, capitalization and other financial information relating to Mintage Mining
  • failing to disclose information about Mintage Mining’s access to power and electricity and the costs associated with power and electricity
  • failing to disclose information relating to the security of the hardware and software used to mine cryptocurrencies and the risks associated with a hacking incident or other malicious attack and
  • failing to disclose information about the location and suitability of the facility where Mintage Mining mines cryptocurrencies

With respect to the Kala ICO, the Securities Board claim Nui and Olayan are

  • intentionally failing to disclose that the price of Kala is not being set by the free market
  • intentionally failing to disclose the methodology used to price Kala at $0.02 per token
  • intentionally failing to disclose that, when and if Kala is listed on a cryptocurrency exchange, the price of Kala might be less than $0.02 per token and
  • intentionally failing to disclose that, until and unless Kala is listed on a cryptocurrency exchange, Kala is a relatively illiquid cryptocurrency and investors may not be able to readily identify a willing purchaser

And with respect to Nui’s representation that the law firm Jones Day are a shield from US securities law;

Mintage Mining, Social Membership Network Holding and Olayan are telling investors that Mintage Mining is “in compliance” with securities laws, “works to always stay ahead of cryptocurrency regulation”, and “remain[s] so continually by keeping in contact with legal firms”.

These statements are materially misleading or otherwise likely to deceive the public because … Mintage Mining, Social Membership Network Holding and Olayan are violating … the Securities Act (and) engaging in securities fraud.

The cease and desist notice goes on to conclude;

The Hash Rate Unit investment program, the Open-Ended Unit investment program and the investments in Kala Rigs are securities.

Respondents are violating … the Texas Securities Act by offering securities for sale in Texas at a time when the securities are not registered with the Securities Commissioner.

Respondents are engaging in fraud in connection with the offer for sale of securities.

Respondents are making offers containing statements that are materially misleading or otherwise likely to deceive the public.

Respondents’ conduct, acts, and practices threaten immediate and irreparable public harm.

Nui, Mintage Mining and Darren Olayan have been ordered to immediately cease offering unregistered securities in Texas.

With Texas securities law being materially indifferent from federal securities law, by extension Nui and Mintage Mining are operating illegally across the rest of the US.

The Texas Securities Board estimates victims have lost over $8.5 million dollars through Nui and Mintage Mining.

Whether this will attract the attention of the SEC remains to be seen.

In the meantime Nui and Olayan have thirty-one days to challenge the Texas cease and desist.

That would of course require them to prove unregistered securities are legal.

Surely Jones Day are up to the task. I mean this is exactly what Nui and Olayan were paying them for, right?

Grab your popcorn folks…

 

Update 22nd February 2019 – As per a February 21st order, the TSSB has fined Nui $25,000 for violations of the Texas Securities Act.