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.

tZERO Opened Its Doors to Non-Accredited Investors, but Their Options Are Still Limited

Samuel Haig

Last week, tZERO announced that its securities tokens (TZROP) are now available to be traded to non-accredited investors, as per Rule 144 of the Securities Act of 1933.

Despite the launch, the platform offers limited functionality, Overstock's OSTKO security token and TZROP comprising the only markets that are currently available for non-accredited investors to trade. Traders are only able to place limit and market orders to purhcase security tokens using fiat currency, with tZERO's markets open for trade during weekdays between 9:30am and 4:00pm EDT.

Signing up to trade on tZERO requires submitting identifying documentation to the platform, with verification taking several days for the company to complete. As the platform develops and evolves, however, more functionality is to be expected.

TZROP Tokens to Generate Divident for Investors

TZROP were first issued via a private placement during August 2018, and have been tradable among accredited investors since January of this year. The tokens are now exclusively tradable on the PRO Securities alternative trading system (ATS) to investors who hold an account with Dinosaur Financial - a broker-dealer headquartered in New York.

According to a press release, the TZROP token offers investors “direct exposure to tZERO’s revenue growth through its quarterly dividend model,” with tZERO pledging to distribute 10% of its adjusted gross revenue to holders of its security token . Investors can reportedly choose to receive dividends in the form of BTC, ETH, TZROP, or U.S. dollars.

However, the release notes that the distribution of dividends is subject to approval from tZERO’s board of directors, and Delaware law.

Peer-to-Peer Trading of TZROP Tokens Prohibited

TZERO emphasized that peer-to-peer transfers of TZROP have not been authorized, asserting that TZROP holders must exclusively resell tokens “on the PRO Securities' [...] ATS only through a brokerage account established with Dino, a subscriber to the ATS, with clearing and custody provided by Electronic Transaction Clearing, a registered broker-dealer, and Computershare, as transfer agent.”

To comply with the company’s regulatory obligations, tZERO also reserves the right to prohibit tZERO security token holders from moving TZROP from Dinosaur Financial brokerage accounts to personal wallets.

The chief executive officer of tZERO, Saum Noursalehi, stated:

“Following the one-year anniversary of the close of our security token offering, non-accredited investors now have the ability to purchase and trade in our security tokens. Today marks another milestone as we further democratize access to all investors, regardless of net worth, can invest in the business opportunity of a blockchain-based capital market.”

TZERO Receives Patent for ‘TOME’ Technology

On Aug. 6, 2019, tZERO was awarded a patent for a process for recording trading data on a public blockchain, dubbed the “Time Ordered Merkle Epoch (TOME) methodology.”

According to the company’s announcement:

TOME is a base-layer technology that uses digital signatures to record and verify time-series data such as trades, executions and settlements. This technology enables low-latency systems, including traditional matching engines or private blockchain ledgers, to be anchored into immutable public blockchain ledgers.

TZERO plans to incorporate TOME into its product suite, in addition to licensing the technology to other firms.