The Texas State Securities Board has ordered a cryptocurrency investing website fraudulently claiming a connection with Tesla Inc. and SpaceX to immediately halt operations.
In an emergency cease-and-desist order Monday, regulators alleged the entity called Tesla SpaceX Investments, or TSX — and that goes by other similar names — has sold unregistered securities, engaged in fraud and deceived the public.
TSX’s website displays the logos of Tesla, the electric-car maker run by Elon Musk and headquartered in Austin, and SpaceX, the commercial space company with major operations in the state, but the board says its has no connection with the companies. The company says it uses an automated trading system using “bot algorithms” to trade on a customer’s behalf. A bot is a type of software programmed to do certain tasks.
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Marvin Pfeiffer/Staff Photographer
The securities board ordered TSX to stop selling securities until those involved, and the investments they’re selling, are registered with the state securities commissioner. That’s unlikely to happen anytime soon, the board says, because the whole operation appears to be a scam.
Despite the order, the company’s website was still online Thursday, though some content had been removed. Phone calls and email seeking comment went unanswered.
Joe Rotunda, director of enforcement for the securities board, said Thursday his team team took action after being notified by regulators in Canada that TSX may have been promoting its products to Texans.
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“We began investigating TSX on the same day we received the tip,” he said in an email. “The markets move fast, and we can’t wait for investors to complain before we start investigating.” Once investors realize they’ve been scammed or the issuer collapses, “it becomes very difficult to recover funds for victims.”
A 10-page order lays out a list of misrepresentations the board says placed it in violation of the Texas Securities Act.
From a non-existent address of “Gigafactory Texas N” — which infers a connection to Tesla’s Gigafactory Texas — to phony customer testimonials, fake info about company leaders, false claims about the size of the company’s business and baseless investment guarantees, the board alleges TSX has misled its customers and has the potential to create “immediate and irreparable harm.”
The website boasted more than 15,500 “happy clients,” nearly 900 employees, 64 global locations and highlighted that the company is “globally licensed and regulated.” The company has never registered with the Texas Securities Commissioner or Secretary of State. Nor has it registered with Financial Industry Regulatory Authority, or FINRA.
Eric Gay/AP
According to the order, TSX offered tiered investment “packages” in which investors could deposit cryptocurrency to earn a guaranteed rate of interest. Its “Silver Package,” for example, required an investment between $500 and $4,999 to return “10% interest each week, 10% trading/withdrawal commissions and 5% referral bonuses.” Its “Elite Package” required an investment between $50,000 and $100,000 that it said would generate 25% interest weekly.
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At least 150 transactions on the company’s cryptocurrency accounts totaled more than $117,000, the board said. It deemed the packages to be securities and said those selling them are engaging in fraud.
Eric Gay/AP
The order also outlined TSX’s confusing messaging about risk. It says its services “pose significant risks to investors” but also that investments in TSX packages “do not have any risk.”
Its claims are buttressed by its use of stock images showing people on the company’s “expert team.” But the photo of Vice President Cameron Williamson, the board says, is a headshot of a model from a photography studio in Northern Ireland, the order says. Photos of at least three others purportedly on TSX’s leadership team are also stock photos.
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Testimonials from at least two customers included apparently phony claims of big returns along with stock photos of unrelated people.
Rotunda said anyone who has invested in TSX products should attempt to withdraw their digital assets or funds sent to TSX. If unable get their money, they should contact their state or provincial regulator.
Texas residents can reach the Securities Board via email to enforceinfo@ssb.texas.gov and others can reference the North American Securities Administrators Association’s website for their local regulators.
June 20, 2024
Brandon Lingle covers technology, cybersecurity and aerospace for the Express-News. You can reach him at Brandon.Lingle@express-news.net.
Before writing for the Business team, he was an Editorial Board member and opinion columnist. Brandon joined the paper in 2020 as a Report for America fellow. He came to journalism after more than 20 years in the Air Force.