Cryptocurrency cloud mining service Genesis Mining was recently hit with a cease-and-desist order from South Carolina regulators, after it was ruled that the cloud mining contracts the company offers are securities.
According to the order, a second firm called Swiss Gold Global was named. Per the Securities Commission of South Carolina, Swiss Gold Global acted as a broker-dealer for Genesis Mining, and both companies were involved in the offering of unregistered securities.
Genesis Mining offers its users various cloud mining contracts, in which they purchase a specific amount of computing power over a set period of time. The company takes care of the hardware and its maintenance, while giving the user the revenue the hardware makes over the specified time period. Per the Securities Commission of South Caroline, these “constitute investment contracts and are thus securities.”
Reportedly, these securities haven’t been registered with the state and don’t have exemptions. As such, the company is illegally offering them in the region. The order reads:
“At all times relevant to this order, Respondent Genesis Mining continuously offered investment opportunities in Mining Contracts to South Carolina residents through its website. At no time relevant to the events stated herein was Respondent Swiss Gold Global registered with the Division as a broker-dealer, and no exemption from registration has been claimed by Respondent Swiss Gold Global.”
The Commission ordered both companies to stop doing business in South Carolina. Both were permanently barred from offering securities in the state in the future, although both have the opportunity to request a hearing and present their side.
Genesis Mining’s second hiccup
This is notably not the first time Genesis Mining has gotten into trouble. Back in 2017, the company was hacked as someone managed to infiltrate its hot wallet and steal its funds. The company claims it managed to shut down attack immediately after it was detected, but the damage was done.
Since the attack, Genesis Mining managed to bounce back and repay its customers for stolen balances. At the time, a company blog post read:
“Shortly after the intrusion was detected, our team was able to shut down the attack. We immediately took steps to mitigate the issue, including enhancing our monitoring and detection capabilities, and further hardening our environment. One of those increased security measures was to delay our daily payouts.”
The cease-and-desist order from South Carolina is the second hiccup the company has to deal with – albeit this is a legal one. The order will likely see other US states analyze the company’s business, to determine whether or not they’ll allow it to sell its contracts under their jurisdiction.