US State Takes Action Against Crypto Operation Imitating a Bank

The U.S. state of North Dakota has issued a cease and desist order against a cryptocurrency operation imitating a fully licensed bank in Liechtenstein. This operation goes by the same name as the token announced by the bank. Its website mirrors the bank’s website and its crypto announcement was identical to the bank’s, including a plan to issue a Swiss franc-backed stablecoin.

Also read: Yahoo! Japan Confirms Entrance Into the Crypto Space

Spoofing Bank’s Announcement

North Dakota Securities Commissioner Karen Tyler issued a cease and desist order on Monday against Union Bank Payment Coin, aka Ubpc, as well as its officers, directors, agents, and employees. The order states that they are promoting “unregistered and potentially fraudulent securities” in the form of an initial coin offering (ICO) to North Dakota residents.

Union Bank AG, a fully licensed bank in Liechtenstein, announced on Aug. 17 that “it will be the world’s first fully licensed and regulated bank to issue its own security tokens in alignment with Liechtenstein’s regulatory authority Fma.” The bank also unveiled a plan to issue Union Bank Payment Coin which, it claims, will be “a stablecoin that is fully backed by a fiat currency – e.g. the Swiss franc.”

North Dakota’s securities regulator elaborated:

The Union Bank Payment Coin solicitation appears to be an attempt to fraudulently acquire funds through the exploitation of an announcement made by Union Bank AG, a fully licensed and regulated bank based in Liechtenstein.

The regulator further described, “Several elements of the Union Bank Payment Coin website are directly copied from the Union Bank AG website including the stylized elements, verbiage, leadership information and images.”

According to the securities department, Union Bank Payment Coin stated that it is seeking to become the “world’s first security token backed by a fully licensed bank.” In addition to claiming that the coin is a “security token offering,” the company represents that it is issuing a “stable coin that is fully backed by a fiat currency – the Swiss franc,” the regulator detailed.

The domain for Union Bank Payment Coin was registered on Aug. 29, 12 days after Union Bank AG made its token announcement. The registrant is Bohdan Kozachok, a web designer from Vasylkiv, Ukraine. No physical address, location or country of the organization is provided on its website, the regulator emphasized. Furthermore, the IP address for Union Bank AG is located in Liechtenstein, whereas the one for Union Bank Payment Coin is located in Russia.

The commissioner’s order also noted that Union Bank Payment Coin’s website has “instructions on how to invest by purchasing the tokens, which mandates that investors buy the tokens” with BTC or ETH prior to filling out an online registration form.

Ongoing Crackdown

This latest ICO-related order is the result of ongoing investigations conducted by the department’s ICO task force, set up to identify ICOs and cryptocurrency-related investments that pose a risk to residents of the state.

The effort is part of Operation Cryptosweep, a coordinated multi-jurisdiction investigation and enforcement effort involving over 40 U.S. and Canadian securities regulators. It has been investigating more than 200 crypto-related cases.

The securities department also outlined some common red flags of fraudulent ICOs such as “plagiarized white papers containing spelling and translation errors.” They may also comprise “fictitious executive teams represented by stock internet photos, fake business addresses and phone numbers, [and] fake celebrity endorsements.” Promises such as “no risk and high returns” and “false claims about securities law compliance” are also prevalent.

In September, the department issued cease and desist orders against three companies for promoting unregistered ICOs in the state, followed by three more in October.

What do you think of this ICO pretending to be related to a bank? Let us know in the comments section below.

Images courtesy of Shutterstock, North Dakota Securities Department, and Union Bank AG.

Need to calculate your bitcoin holdings? Check our tools section.