Cryptocurrency Crackdown Continues With New Jersey Ban

February 12, 2018, 11:49 PM UTC

As the promise of moderated regulation helped the price of Bitcoin rebound over $8,800, U.S. regulators are continuing their crackdown on firms in the cryptocurrency space.

On Friday, the New Jersey Bureau of Securities ordered Bitcoin-related investment pool Bitstrade to stop offering its goods in New Jersey. According to the regulator, Bitstrade, which claims to take customers’ Bitcoin and invest the funds in the stock market, had been offering the equivalent of securities, but had not registered with the New Jersey government. The New Jersey order, however, doesn’t stop Bitstrade from marketing its wares outside of the state.

Further fueling suspicions, the company’s listed address in Redland, Calif., “does not exist,” the state securities regulator said.

“We want to make sure that investors tempted to cash in on the cryptocurrency rage aren’t being lured into sending funds to an anonymous Internet entity without knowing where the funds are going or how they’ll be used,” said New Jersey Attorney General Gurbir Grewal in announcing the emergency order against Bitstrade.

Bitstrade, which has no named executives, says it guarantees up to 10% of returns.

“The more you invest, the more profit you will receive,” its website states.

Bitstrade claims on its website that it has received some $802,035 in investments so far.

The New Jersey ban on Bitstrade comes amid a deeper crackdown throughout the cryptocurrency sphere. Last week, Jay Clayton, chairman of the U.S. Securities and Exchange Commission, reiterated that a fundraising method using cryptocurrencies, or an initial coin offering (ICO), should be subject to more stringent regulations—like those usually placed on securities offerings.

“I believe every ICO I’ve seen is a security,” Clayton said during last week’s Senate hearing, noting that no ICO has yet registered with the SEC. “ICOs that are securities offerings, we should regulate them like we regulate securities offerings. End of story.”

A handful of ICOs have fallen under SEC scrutiny in the past few months. Food-review app company Munchee pressed pause on its $15 million ICO after the SEC argued the firm should register with the regulator. The government agency also filed charges against a man who had raised $15 million by offering tokens known as PlexCoins.

Investors, however, have generally embraced the new rounds of regulation, as major U.S. agencies including the SEC have indicated no plans to outright ban cryptocurrencies. That’s one reason the recent Senate hearing helped spark a rally in Bitcoin prices, which had crashed from a high of $20,000 to below $6,000 in less than two months.