Cryptocurrency investment firm agrees to Texas fine, restitution deal

A cryptocurrency-related investment operation that marketed its products in Texas last year is generating some real-world legal tender -- in terms of a fine and restitution for investors.

Mintage Mining LLC, a Utah-based company, and a number of its affiliates agreed to the penalties this week with Texas securities regulators, who have spent much of the past 18 months cracking down on what they say is a burgeoning amount of cryptocurrency-related investment fraud in the state.

The resolution to the Mintage Mining case marks the first time that one of the new "digital coin" investment firms targeted by Texas regulators has paid a fine and consented to return money to investors. The restitution is estimated by the company at less than $100,000, although the precise amount hasn't been disclosed, and the fine totaled $25,000.

"We got this one stopped early," said Joe Rotunda, director of enforcement at the Texas State Securities Board. "This thing would have continued to sell and could have spread like wildfire throughout Texas. It didn't have that opportunity."

Mark Rasmussen, a Dallas-based attorney for Mintage Mining and its affiliates, said the companies agreed to settle the case only because "they wanted to clear their name and show that they didn't commit fraud."

The final order that they agreed to "is just a (securities) registration violation," Rasmussen said. "There is nothing in the (final) order about fraud."

He said the companies also dispute the conclusion in the final order that they were selling products in Texas that technically constitute securities that are required to be registered. "But we're not going to contest it anymore in Texas" and opted to settle the case, he said.

Rasmussen said it's uncertain at this point if the companies will now attempt to register their products in Texas so that they can do business here.

The state securities board issued a cease-and-desist order last July against Mintage Mining and its affiliates, one of more than 15 disciplinary orders regulators have logged against crypto-related investment companies since late 2017. Rotunda said his office is in negotiations with some of those companies that could result in outcomes -- meaning fines and restitution -- similar to the Mintage Mining case.

Last year, securities regulators said crypto-related potential swindles had surpassed schemes involving oil and gas assets, real estate and stocks as the most popular means by which fraudsters were attempting to separate Texas investors from their money. Even though the values of the most popular cryptocurrencies have fallen steeply since early 2018, Rotunda said his office still is seeing a high amount of potential investment fraud in the sector.

Bitcoin, for instance, was trading Friday at about $3,990 per token, according to Coinmarketcap.com, which provides cryptocurrency price quotes, compared to a high of above $20,000 in December 2017.

"We're still getting (cryptocurrency-related) cases" anyway, Rotunda said. "We're still seeing fraudulent offerings come to Texas."

The state securities board had alleged, among other things, that Mintage Mining was "illegally and fraudulently issuing and offering two different investments in the mining of cryptocurrencies." It also said that one of Mintage's affiliates, a multi-level marketing company called NUI Social, "purports to have more than 300,000 members in 140 countries" and was recruiting "members" eligible to earn commissions by signing up more people.

Mintage's advertisements contended it "can generate extraordinary returns -- up to 250 percent annually -- by successfully mining cryptocurrencies," the securities board said last year.