Australia’s Financial Watchdog Cracks Down on ‘Misleading’ ICOs & Crypto Funds

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Australia’s financial regulator and watchdog is ramping up its scrutiny into ‘misleading or deceptive’ initial coin offerings (ICOs) and crypto-asset funds targeting retail investors.

The Australian Securities and Investments Commission (ASIC) has confirmed it has identified “consistent problems” to ultimately shut down several initial coin offerings aimed at soliciting funds from retail investors.

A radical new form of digital fundraising powered by cryptocurrencies like bitcoin and ethereum, ICOs are a source of capital for startups and companies who offer custom cryptographic tokens with an inherent benefit in exchange to investors. ICOs aren’t banned in Australia and while there is no ambiguity about their legal status, they are largely unregulated.

The “use of misleading or deceptive statements in sales and marketing materials”, running an “illegal registered managed investment scheme” without possession of an Australian financial services licenses were, in particular, highlighted by the ASIC as consistent problems found among the targeted ICOs, leading to “significant risks” for investors.

The regulator’s commissioner John Price said:

“If you raise money from the public, you have important legal obligations. It is the legal substance of your offer – not what it is called – that matters. You should not simply assume that using an ICO structure allows you to ignore key protections there for the investing public and you should always ensure disclosure about your offer is complete and accurate.”

Furthermore, the regulator also revealed it blocked ICOs from raising capital in five separate matters since April 2018 due to their lack of investor protection measures. All five ICOs are on hold while some are restructuring to comply with the mandated requirements, the ASIC said.

ICO operators who have completed their token issue are also seeing the ASIC’s scrutiny. A crypto investment fund dubbed the ‘New Dawn Fund’ was slapped with a final stop order on its Product Disclosure Statement issued by Investors Exchange Limited (IEL) after the regulator’s concerns. IEL has since consented to the final stop order, the ASIC added.

The regulator has previously identified “fundamental concerns” in the structure, status of the offeror and the whitepaper offered in specific ICOs in the past, putting the brakes on the issuance before its launch.

A year ago, nearly to the day, the ASIC released guidelines on ICO fundraising to remind operators of their obligations before a token issuance.

The regulator said at the time:

ASIC recognises that ICOs have the potential to make an important contribution to the options available to businesses to raise funds and to investment options available to investors.

In April, ASIC commissioner Price confirmed the ICO space will be “a key focus” area for the regulator going forward. He stressed that the regulator will keep an “open mind” to new financial innovations but not at the expense of “basic consumer protection” policies.

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Bitcoin, Ethereum, Ripple, Bitcoin Cash, EOS, Stellar, Litecoin, Cardano, Monero, IOTA: Price Analysis, September 19

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

The market data is provided by the HitBTC exchange.

Germany’s Minister of Finance Olaf Scholz believes that cryptocurrencies are not yet ready ro replace traditional fiat money, but he is not so confident about “20 to 30 years” into the future. This is a bullish sign, which confirms that the world is gradually coming to terms with the fact that cryptocurrencies are here to stay.

Yet, China continues to “remind” investors about the risks associated with Initial Coin Offerings (ICOs) and crypto trading. A committee of lawmakers in the UK has urged the regulators to act by introducing measures for consumer protection.

In the U.S., a study by the New York Attorney General’s office has found that many cryptocurrency exchanges lack sufficient customer protections, and have “serious conflicts of interests.” The report observed that only a few crypto trading platforms have market surveillance capabilities to deter trading manipulation.

A robust system is needed to attract large players, who are accustomed to the traditional exchanges that have many protective measures built in against market manipulation and fraud. Price volatility, however, might remain for even longer time as the market matures.

Over the past several months, we have shown how the traders can keep their risks low when trading cryptocurrencies. Let’s see if we can spot any buy setups today.

BTC/USD

Bitcoin has held $6,200 for the past two days, but is struggling to move up. Both moving averages are sloping down and the RSI is also in the negative territory. This shows that the sellers are in command.

BTC/USD

A break of the $5,900–$6,075.04 support zone will complete two negative formations, a head and shoulders pattern and a descending triangle pattern. Though head and shoulders is primarily a reversal pattern, it can also work as a continuation pattern, as is the case currently.

The lower levels that can offer some support are $5,450 and $5,000. However, after a break from such a major support, a number of stops will be hit, resulting in a quick drop. Therefore, we suggest traders avoid catching the falling knife if $5,900 breaks down.

If the bulls defend the support zone and push price above the moving averages, the BTC/USD pair can rally to $6,900 and $7,400. We suggest an aggressive buy on 50 percent of the desired position size on a close (UTC time frame) above $6,600.

The remaining positions can be added after the digital currency closes above the downtrend line of the descending triangle.

ETH/USD

The trend in Ethereum is still a downward one, but we find some buying interest around the $183–$192 area. However, on the upside, the 20-day EMA is proving to be a major resistance as the bulls have failed to scale this level for the past four days.

ETH/USD

If the bulls break out of the 20-day EMA, a move to the 50-day SMA is likely, with minor resistance at the downtrend line of the descending channel. We shall turn bullish if the price sustains above the channel for three days in a row.

If the ETH/USD pair turns down from the current levels, it can slide to $192 and further to $183. The pair is at a critical level and we should get a clearer picture within the next couple of days.

XRP/USD

Ripple bounced sharply from $0.27 on September 18 and broke out of the 20-day EMA. Currently, it is facing resistance at the 50-day SMA.

XRP/USD

If the bulls break out of the 50-day SMA, the next resistance is at $0.37390. The downtrend line is also located just above this level. If the XRP/USD pair sustains above the downtrend line, we can expect the trend to change from down to up.

If buying dries up at higher levels, the virtual currency might spend some more time inside the range of $0.27–$0.37390. Though the bounce from the lows is a positive development, we shall wait for additional evidence before suggesting any trades on it.  

BCH/USD

When the sentiment is negative, any uncertainty drives away the investors and that is what seems to be happening with Bitcoin Cash. With a looming split, the buyers are not taking any fresh positions, which has kept the cryptocurrency near its year-to-date lows.

BCH/USD

The trend is down, as both moving averages are sloping downward and the RSI is in the negative territory. A break of the September 11 low of $408.0182 will resume the downtrend and the BCH/USD pair can slump to the next support zone of $280–$300.

The bulls have to overcome the resistance from the 20-day EMA, the 50-day SMA and the downtrend line of the descending channel to signal a change in trend.

EOS/USD

EOS has been holding above $4.4930 since August 17. If this support breaks, the slide can extend to the next support at $3.7823. Therefore, traders can keep their stops on the remaining long positions at $4.4.

EOS/USD

On the upside, the bulls have been facing a stiff resistance at the 20-day EMA and $5.65. The EOS/USD pair will gain strength if it breaks out of $5.65.

Though the 50-day SMA is sloping down, the 20-day EMA is trying to flatten out. The RSI continues to be in the negative area. This shows that the virtual currency is in a range but with a negative bias.

XLM/USD

Stellar has formed a range inside a range. Since September 11, it has been trading inside the range between $0.184 and $0.21489857. If the bulls break out of this range, a rally to the top of the large range of $0.184–$0.24987525 is probable.

XLM/USD

The critical level to watch on the downside is $0.184. If the XLM/USD pair breaks and sustains below the range it will complete a descending triangle pattern, which is a negative sign.

On the other hand, if the bulls break out of the range and the downtrend line of the descending triangle, it will invalidate the bearish pattern, which is a bullish sign. We shall wait for the virtual currency to show some strength before recommending any trades on it.

LTC/USD

The bulls defended the critical support on September 18, but the pullback is facing resistance at the downtrend line and the 20-day EMA. Currently, Litecoin is consolidating in a large range of $49.466–$69.279 – a process, which began August 8.

LTC/USD

The LTC/USD pair will resume its downtrend if it sustains below $47.246. The next support on the downside is between $40 and $44.

On the upside, the virtual currency can rally to $69.279 if it breaks out of the moving averages. We might suggest a long position on a break out of the range because it will indicate a probable double bottom.

ADA/USD

Cardano broke out of the tight range of $0.060105–$0.071355 but is finding it difficult to sustain the higher levels. Currently, the price has dipped back into the range.

ADA/USD

Both moving averages are trending down and the RSI is in the negative zone. The trend remains headed downward. The ADA/USD pair will have to enter a bottoming formation before a change in trend can be confirmed.

Until then, any pullback attempts will face resistance at the moving averages. The downtrend will resume if the bears force a break down from the range.

XMR/USD

The bulls are trying to defend the support at the moving averages but are finding it difficult to break out of $120. Monero has turned volatile and trendless in the past few days, as both moving averages have flattened out and the RSI is close to the neutral territory.

XMR/USD

A symmetrical triangle is developing close to the bottom. A break of the trendline of the triangle will be a bearish development. It will increase the probability of a retest of $76.074, though the pattern targets are way lower. We suggest holding the long positions with the stops at $95.  

On the upside, the XMR/USD pair will face resistance at the downtrend line and at $122.6. It will attract buyers only after these two resistances are crossed.  

IOTA/USD

IOTA has been range bound between $0.5 and $0.6170 since September 6. The 50-day SMA and the downtrend line are also close to the upper end of the range. Hence, $0.6170 will act as a stiff resistance. The cryptocurrency will show strength if it can break out of this resistance.

IOTA/USD

The 50-day SMA is sloping down and the 20-day EMA is also starting to turn down, after trying to flatten in the past few days. This shows that the path of least resistance is to the downside.

A break of the $0.5 support can sink the IOTA/USD pair to $0.45 and further to $0.4. Traders can keep the SL of $0.46 on the long positions.

The market data is provided by the HitBTC exchange. The charts for the analysis are provided by TradingView.

This Third-Party DApp Lets You Tokenize Your CryptoKitties

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So you spent upwards of $100,000 to purchase one of the hottest digital felines on CryptoKitties — now what?

That’s the question plaguing many users of CryptoKitties, which remains the most popular decentralized application (dApp) on Ethereum, per DappRadar, but — despite receiving $12 million in venture funding — is struggling to grow its active user base beyond a core of 500 dedicated fans.

CryptoKitties user chartCryptoKitties volume/active user stats | Source: DappRadar

To aid in that process, the development team behind CryptoKitties has encouraged third-party developers to join the “KittyVerse” by using the dApp’s public API to build applications that capitalize on the fact that, as ERC-721 tokens, kitties are not confined to creator Axiom Zen’s servers. (External use of CryptoKitties tokens is still subject to the company’s terms of service.)

One such third-party dApp is Kitty.Kred, through which CryptoKitties users can create collectible tokens for each of their digital felines.

These meta-tokens are not tokenized in the sense that they represent ownership rights in the original ERC-721 token itself (i.e. security tokens), but they do allow kitty owners to create fixed-supply collectible coin sets that feature the kitty’s likeness.

CryptoKitties Kitty.kredSource: Kitty.Kred

Users will need to spend, CƘr, a token created by the dApp’s developers, to create the coins, but they can recoup this fee — and perhaps even turn a profit — by selling the coins to other users and/or activating royalties on future marketplace sales.

Notably, although CryptoKitties tokens exist as non-fungible ERC-721 tokens on the Ethereum blockchain, Kitty.Kred coins are, by default, saved to the Stellar blockchain. Kitty.Kred chose to use Stellar rather than Ethereum to minimize gas costs associated with ETH transactions, which should make it easier to onboard users who do not own cryptocurrency. However, users who prefer to hold their coins in an ethereum wallet can export them, with the stipulation that these transactions will incur gas fees.

Featured Image from Axiom Zen

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R3 Partners With Dutch Tech Company to Pilot Blockchain-Based Digital IDs

Blockchain consortium R3 has deployed a digital ID application developed by Dutch digital security company Gemalto on the latest version of the Corda Platform, according to an announcement published September 18.

Corda is an open-source blockchain-powered platform developed for financial establishments by R3 in collaboration with more than 200 of its partners. The platform is geared to work within finance to operate massive transactional volumes and restrict access to transaction data.

The parties expect to conduct several pilots of the application — called the Trust ID Network —  that will reportedly be launched later this year.

Per the announcement, Trust ID Network enables digital service providers to operate “fully verified and secured” user personal data by creating a Digital ID. Consumers can register within various banking, e-commerce and e-government services while avoiding repeated due diligence procedures in each instance.

The integration of Trust ID Network will reportedly allow users to control their data through a mobile app dubbed ID Wallet, where they can enter, certify, and share their personal information with specific service providers. Bertrand Knopf, EVP of Banking and Payment for Gemalto, explained:

“Trust ID Network solves the profound weaknesses of traditional, ‘siloed’ identity frameworks: the clumsy user experience, rising costs and difficulties in complying with stricter regulations… Financial institutions are best-placed to lead this self-sovereign identity revolution, but it will prove similarly attractive to a wide array of other service providers.”

In July, R3 released a “version” of its Corda blockchain platform aimed specifically at businesses. The new version of the platform is reportedly “optimized to meet the demands of modern day businesses,” and includes a “Blockchain Application Firewall” to enable the platform operate within corporate data centers and still communicate with Corda’s nodes.

Newsflash: Japanese Cryptocurrency Exchange Zaif Hacked, $59 Million in Losses

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Japanese cryptocurrency exchange Zaif was the victim of a major hack last week, local media sources have reported and the company has now confirmed.

The hack, which occurred on Sept. 14 but was not discovered until Sept. 17, saw the hacker steal various amounts of bitcoin, bitcoin cash, and monacoin from the exchange’s hot wallet, collectively worth 6.7 billion yen (just under $60 million).

Zaif is a minor exchange, currently ranked 108th in daily volume, according to CoinMarketCap.

However, the incident could have major implications for the cryptocurrency industry in Japan, as regulators have already tightened their oversight in response to the record-setting Coincheck hack that occurred in January.

This story is developing. Check back for updates…

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New York University Offers Major in Blockchain Technology

New York University (NYU) has reportedly become the “first” university in the U.S. to offer students a major in blockchain technology, CBS New York reported September 18.

The program will reportedly be provided by the NYU Stern School of Business, which was also a pioneer in offering undergraduate courses in cryptocurrencies and blockchain. Professor Andrew Hinkes commented on the new program:

“We hope to establish a groundwork so that the students can understand what’s really happening under the hood, so that they can understand both the legal and the business implications, and prepare them to go out and tackle this new market.”

According to associate professor Kathleen Derose, the educational establishment is expecting large companies to partner within the training program, while “the startups in [fintech] will likely invent the new cool stuff.” Following the increasing number of students interested in the new offer, NYU reportedly doubled its course offerings this school year.

Adam White from cryptocurrency exchange Coinbase said that students “see the development, the birth of a new industry,” adding that “in many ways, we look at things like Bitcoin (BTC) and Ethereum (ETH) and blockchain as the internet 3.0.”

Last month, Coinbase released a study, showing that 42 percent of the world’s top 50 universities have at least one class on cryptocurrencies and blockchain. Of the 172 classes reviewed in the study, 15 percent were offered by economics, finance, law and business departments, while 4 percent were in social science departments. The study found that blockchain and crypto-related courses are most popular in the U.S. among other countries.

U.S. students’ interest in crypto is reflected not only in educational programs, but in investing in digital currency as well. As a study conducted by Student Loan Report in March shows, 21.2 percent of college students used loan money to fund a crypto investment, hoping that the upward price volatility in crypto would help pay their debts faster.

NYU Offers First Crypto Major in US, Sees Exponential Increase in Interest

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New York University, a prestigious college found in 1831, has started to offer the first crypto major course in the US.

Adjunct professor Andrew Hinkes told CBS New York in an interview that the institution is helping students understand both the legal and the business implications of crypto and blockchain technology.

Hinkes said:

“We hope to establish a groundwork so that the students can understand what’s really happening under the hood, so that they can understand both the legal and the business implications, and prepare them to go out and tackle this new market.”

Crypto Boom at Universities

Throughout 2018, the demand for crypto-related courses at colleges has increased significantly, ever since prestigious institutions like Stanford and MIT started offering programs covering cryptocurrencies and blockchain technology.

As Mustafa Khan, a student at NYU who enrolled in the crypto major, it has become important for millennials to understand and study an emerging asset class that is rapidly integrating into the global finance sector.

“In the environment we live in today, it’s become especially relevant to get a hold of how new technologies work and how they interact with the legal system,” Khan said.

David Yermack, finance department chair at NYU, stated that students who previously graduated at the college have come back to take crypto courses to obtain a better understanding of the rapidly growing market and the industry surrounding blockchain technology.

“There’s a few people who graduated some years ago but have come back to sit in on this just because of the novelty and the edginess of the topic,” Yermack added.

Similar Movement in Institutional Market

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Influenced by the initial entrance of Goldman Sachs into the cryptocurrency sector through Bitcoin futures clearance, an increasing number of major banks have started to develop crypto custodian solutions to serve institutional investors.

Banks are required to adjust to the demands of its clients and consumers and as such, depending on the trend of the market and the needs of investors, banks tend to add more lucrative services onto their existing range of products to ensure that it can facilitate the interest towards new asset classes and markets from investors.

According to Coinbase vice president Adam White, the education industry has seen a similar trend, as students began to ask universities to offer education on a new industry that is seeing similar levels of interest and developer activity as the Internet in its early days

“This is a grassroots movement. These are students saying, ‘hey, university, I want to take a class on this.’ I think they see the development, the birth of a new industry. In many ways, we look at things like Bitcoin and Ethereum and blockchain as the internet 3.0,” White said.

The integration of crypto and blockchain technology into New York Unviersity’s major courses is expected to lead to other prestigious and well recognized institutions in the US offering similar programs.

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Bitcoin Core Update FIxes Vulnerability That Reportedly Could Crash Network for $80,000

Bitcoin Core has released an update following the recent detection of a vulnerability in the software, according to a September 18 press release by the Bitcoin Core Project. According to the statement, Bitcoin Core 0.16.3 was released with a fix for a denial-of-service (DoS) vulnerability.

The vulnerability could reportedly cause a crash of older versions of Bitcoin Core if they attempted processing a block transaction that tries to spend the same amount twice. According to the press release, such blocks can be only created by a miner since they are invalid. In order to create such block, a miner would be required to burn a block of “at least” 12.5 Bitcoin (BTC) worth about $80,000 as of at press time.

The new update includes a feature that eliminates a potential crash by enabling the software to “quietly reject” invalid blocks created by miners.

Emin Gün Sirer, an associate professor of computer science at Cornell University, told Motherboard that the entire network could have been crashed for less money than “a lot of entities would pay for a 0-day attack on many systems.” Sirer said that there are many “motivated people” that could have taken this opportunity to bring the network down.

According to Casaba Security co-founder Jason Glassberg, the recent vulnerability found on Bitcoin Core software could “take down the network.” He explained that the network crash “does not appear” to target users’ wallets, but would rather “affect transactions in the sense that they cannot be completed,” as the expert told tech media agency ZD Net.

Cobra Bitcoin, co-owner of Bitcoin.org, said the recent issue in Bitcoin Core was a “very scary bug” that could have affected a “huge chunk of the Bitcoin network.”

Texas State Securities Board Hits Russian Hoaxers with Cease-and-Desist Orders

Texas Securities Commissioner Travis J. Iles has issued emergency ordinances against three separate fraudulent cryptocurrency schemes linked to Russian scammers.

The orders were issued on September 18, 2018, against DGBK Ltd., an offshore digital “bank” that claims to have developed a hack-proof custody solution for digital assets and virtual currencies; Coins Miner Investment Ltd., a Russian cryptocurrency investment promoter; and Ultimate Assets LLC, a purported cryptocurrency and foreign exchange trader.

Coins Miner Investment Ltd.

Based in Russia, Coins Miner extracts money from U.S. residents under false pretexts, pretending to act on behalf of Coinbase, the San Francisco–based crypto exchange platform. According to the Emergency Cease and Desist Order, it does this by sending spam emails impersonating Coinbase, deceiving investors into handing over their money by leveraging the brand image of the digital asset platform.

The order further specifies that a certain Ana Julia Lara, acting on behalf of Coins Miner, falsely claims to work for Coinbase as a crypto trader. To this end, she also sends out a photograph to investors purportedly showing her with the president of Ripple, whereas the person in the photograph was actually a vice president of Cointelegraph Media Group.

Claiming to operate out of the U.K., Coins Miner is actually based in the Russian city of Volgograd, and it makes several fraudulent claims on its website to prospective investors. On its website and in its marketing efforts, the company also deliberately misrepresents a video of a Fortune journalist to make it seem as though its offering is being promoted. In addition, it uses stock photographs to represent its team and its office deceitfully.

Under Texas law, the investments promoted by Coins Miner are classified as securities, but they are not registered to sell securities in the state.

DGBK Ltd.

Belize-based DGBK claims to have developed a hack-proof custody solution for digital assets, and it solicits funds to develop this concept. Claiming to be at work on a so-called Photon Encrypted Ledger Key, a digital wallet that can be opened using biometric data, the company claims that it can facilitate fully anonymous and untraceable transfers of cryptocurrencies and fiat currencies like the U.S. dollar.

Using a misappropriated video of Barack Obama speaking at the 2016 South by Southwest (SXSW) Interactive festival in Austin, DGBK offers prospective investors the opportunity to invest in the DGBK token with promises of up to 1,900 percent returns following the ICO, set to be held next year.

The company claims to have on its payroll a litany of cybersecurity experts and blockchain specialists without offering any proof to support these claims, and it also offers securities for sale without following the necessary registration requirements.

Ultimate Assets LLC

Claiming to be based in Arlington, Massachusetts, but with no provable address, Ultimate Assets promises investors that an investment of $1,000 will turn into $10,000 within just three weeks. It also falsely claims that all initial investments in the trading program are fully indemnified and that refunds will be issued in the event of failure to yield profits.

Its principals listed in the Cease and Desist Order are also accused of violating the Texas Securities Act by offering securities investments without being registered with the Securities Commissioner.

Texas Regulators Shut Down Three Cryptocurrency Scams

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The Texas State Securities Board has issued an emergency action to halt the deceitful offerings of investments in three cryptocurrency related schemes.

The agency entered a cease and desist order against Coins Miner Investment Ltd, DigitalBank Ltd, as well as Ultimate Assets, who is charged for offering Texans misleading ROIs and promising to grow an initial investment of $1,000 into $10,000 in three weeks.

Coins Miner Charged for CyberFraud

According to the emergency order, Coins Miner was found to have used emails and manipulating online media to solicit funds from Texas residents by pretending to represent Coinbase, a San Francisco-based company that operates an online platform for buying, selling, and storing digital currency.

Ana Julia Lara, an affiliate of Coins Minter who crafted the fake email, is also accused of claiming to be a vice president of CoinTelegraph Media Group.

The organization is also accused of fabricating photographs to show its “state-of-the-art office,” as well as using stock photos to portray its employees. A video featuring stock footage of its servers, facilities, and financial professionals was also cited.

ICO Scam

ICO Initial coin offering

The regulator’s  second cease and desist letter was targeted towards DigitalBank for claiming to be building an external wallet called “Photon Encrypted Ledger Key” and raising capital for an illegal initial coin offering (ICO). Also, DigitalBank was found to be offering shares issued by the company and the issuance of a utility coin, called DBGK, set for an ICO next year.

According to the order, the company told likely investors to purchase DGBK at a price of $0.50 and sell it for $10.00 during the ICO. With these terms, a $5,000 investment would rise to $100,000 in the ICO period.

The Texas Securities Board, however, concluded the offering  was deceptive, as it misled investors on the profitability of the company, while hiding key information needed to make unbiased decision.

Additionally, DigitalBank is also being charged for misleading people with multiple videos featuring President Barack Obama, used for describing the Photon Encrypted Ledger Key. The videos, according to the Securities Board, are misleading as they were created at the 2016 SXSW festival, several years before DigitalBank’s inception.

Misleading Numbers

The third cease and desist letter from the Texas State Securities Board was issued to Ultimate Assets, which deceitfully guaranteed investments with a 900 percent ROI in Bitcoin and Forex trading.

Daniel Dishmon and John Jason Woodard are named for publishing the advertisements for fraudulent investments that target Texas residents.

Also, Ultimate Assets told potential investors that they would be able to provide excessive returns. For example, an original investment of $500 would yield a $5,000 return, a $1,000 investment would yield a $10,000 return, and so on. The company further stated that its trading platform involved no risk and that returns were always guaranteed.

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