Colorado Investigating Two Companies Over Illegal ICO Promotion

Jordana Sacks
  • Two companies are currently under investigation for allegedly promoting illegal initial coin offerings to denizens of Colorado.
  • The onus is now on the accused businesses to prove that they should not be issued sanctions.

The Colorado Department of Regulatory Agencies is investigating the actions of two companies accused of promoting illegal initial coin offerings (ICOs) to residents of the state. According to the region’s securities commissioner, Linda Healthcare Corp. (based in California) and Broad Investments LLC (based in Washington) may be in violation of securities laws pertaining to initial coin offerings.    

Linda Healthcare is accused of promoting a currency listed as the Linda Health Coin, which could reportedly be used to buy health insurance with the company. This would grant access to its telemedicine offerings: an artificial intelligence chat service that provides medical solutions through the medium of blockchain technology.  

The issue with this is that Linda Healthcare’s website fails to either provide potential buyers with an insight into the risks associated with investing in cryptocurrency, or to inform them that the initial coin offering in question constitutes a security in the state of Colorado.

Broad Investments has also invited the regulatory body’s ire. Alleged to have been promoting crypto through a token on their website, which they describe as “an equity coin that represents shares of the company, like company stocks”, they have also found themselves faced with the possibility of sanctions.  

Colorado Securities Commissioner Gerald Rome stated that: “Investment opportunities being sold through ICOs over the internet need to be approached with the same level of caution as any highly risky investment venture." He added:

“Most ICOs meet the terms of a securities transaction and carry with them all of the same risks when it comes to losing money. If you are investing money in any kind of cryptocurrency such as a coin or token where you are expecting to reap returns and are relying on those returns to come from the efforts of an outside party, you are dealing with investments.”

Gerald Rome

Per his words, “ICOs are highly risky,” and only sophisticated investors who understand they can lose whatever they invest should put their money in them. Both Linda Healthcare and Broad Investments must now prove that the issuing of sanctions would be unfair as per the Colorado Securities Act if they want to avoid them.

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

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