New Zealand Issues Warning About Three Cryptocurrency-Related Scams

  • New Zealand’s Financial Markets Authority has added three “suspected scams” to their Warnings & Alerts list.
  • Cryptogain, Russ Horn, and Zend Trade are the companies in question that the government wants citizens to stay away from.

Earlier today, New Zealand’s Financial Markets Authority (FMA) added three new companies to its list of “suspected scams.” The three companies are Zend Trade, Cryptogain, and Russ Horn (also known as Forex Equinox). These three companies have been added to the New Zealand FMA’s “Warnings & Alerts” list. This list is an ongoing effort by the New Zealand government to help investors avoid putting their money into the hands of questionable people.

The three companies were labeled as “Suspected Scams,” which means: “We think the operations of the business/person bear the hallmarks of a scam. We strongly recommend that you do not deal with them.” The full list of warnings & alerts can be found here.

CryptoGain appears to be a scam similar to BitConnect, promising daily returns for their investors. On their website, CryptoGainLimited.com, they offer up to 2.6% daily returns for people who invest in their company. Additionally, they offer cloud mining packages (with 30% weekly returns) and a retirement plan (giving “30% profit after retirement”). Such sky-high returns will set off alarms for many investors, as well as their cloud mining offering, which is currently considered an unregistered security in the United States.

In addition, the FMA has identified that CryptoGain is possibly posing as a fake company. There is a company filed as CryptoGainLimited, but it is not related to the company described above. Therefore, the FMA believes this is likely not legitimate.

The other companies - Russ Horn, Forex Equinox, and Zend Trade - are all suspected to be organized under Russ Horn’s leadership. RussHorn.com and ForexEquinox are not scams in the sense that they will take your money - they seem to simply be exaggerated marketing pitches for Russ’ forex trading system.

His website offers a “free plus shipping” book. Although not a scam in the sense of failed project BitConnect, Russ Horn’s website does include some outlandish claims, including “How To Legally Cheat The Forex Markets And Literally Line Your Pockets With Cash.”

ForexEquinox.com claims that his system can “double your money every 30 days.”

Ongoing Suspicions

Zend Trade has been suspected of being a scam after it was found that Zend is not returning clients funds. Unlike ForexEquinox, which teaches people how to trade, ZendTrade offers “Managed Account Services.” This service means that ZendTrade will hold clients' money and trade for them, which could put them under regulatory scrutiny, since this service sounds much more like a hedge fund. FMA claims that this company is connected to Russ Horn.

Ripple Files Motion to Dismiss Lawsuit, Says XRP is Not a Security

  • Ripple has filed a motion to dismiss a lawsuit brought by a group of XRP investors.
  • San Francisco-based startup argues that XRP is not a security.

San Francisco-based startup Ripple has filed a motion to dismiss a pending lawsuit brought against them by a group of XRP investors, arguing that the cryptoasset is not a security. 

XRP Not a Security

According to the filing published on Sept. 19, Ripple denies that XRP is a security because “it is not an investment contract.”

The filing continues, 

Purchasing XRP is not an “investment” in Ripple; there is no common enterprise between Ripple and XRP purchasers; there was no promise that Ripple would help generate profits for XRP holders, and the XRP Ledger is decentralized.

Unlike purchasing traditional securities, such as stocks, Ripple is arguing that it has no obligation to XRP investors despite its close association with the crypto-asset. Ripple further reiterated that XRP is a currency, and should not be considered an unregistered security by regulators and lawmakers. 

In addition to arguing against XRP being a security, Ripple said the statute for the lawsuit has passed and pointed out that the company did sell XRP directly to the plaintiffs, 

Countless other XRP holders in addition to Defendants (including Plaintiff, see id.) sell XRP on exchanges, making it impossible to plausibly conclude that Plaintiff purchased an initial distribution of XRP from Defendants.

The filing stems from a lawsuit brought against Ripple in May 2018 by a group of XRP investors, who claimed the company violated state and federal securities laws. The complaint was amended in August, with the group now arguing that XRP is an unregistered security under the US Securities & Exchange Commission’s (SEC) guidelines. 

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