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TEXAS COMMISSIONER STOPS FRAUDULENT CRYPTOCURRENCY MINING SCHEME

Feb 21
2022

Last month, Securities Commissioner Travis J. Iles warned that scams involving
cryptocurrencies and digital assets present a top threat to retail investors in
2022.  Today, Commissioner Iles brought an action to stop this type of scam—a
fraudulent cryptocurrency mining investment scheme targeting Texans.  

Commissioner Iles entered an emergency cease and desist order against Wireless
Management, LLC, and its principal, William S. Rogers.  It accuses the parties
of promoting investments tied to a technology leveraging a decentralized network
of global hotspots that permits cryptocurrency mining while providing wireless
access for others.
    
“The cryptocurrency and digital asset industry is developing new, exciting
technologies,” said Commissioner Iles.  “As interest grows, bad actors take
notice.  They use the hype and play on FOMO—fear of missing out—to promote
lucrative investments that may actually be very risky and can result in a total
loss of principal. These schemers harm not only our retail investors but also
frustrate innovation by legitimate industry participants.”   

Although Wireless Management and Rogers are located in Florida, they are accused
of publishing online advertisements that encourage Texans to purchase their
investments.  The advertisements allegedly tout a turnkey package in hardware
that “mines crypto currency [sic] and makes… great income every month.”  The
advertisements also claim the turnkey package generates passive monthly income
for five years.

According to the order, the turnkey package is based on Helium.  Helium refers
to a blockchain network and a token that trades under the symbol HNT.  Users
earn HNT by installing and maintaining hotspots—devices that are a combination
of a miner and a gateway that helps provide wireless coverage for connected
devices over a certain radius.  As these hotspots solve proof-of-coverage tests,
owners are rewarded with HNT. 

HNT has a current circulating supply of more than 108 million HNT and a current
market capitalization of approximately $3.2 billion.  According to the order,
the price of HNT is volatile—HNT was priced at around $1.30 per token on January
1, 2021, peaked at around $52.99 on November 15, 2021, and is priced at around
$29.00 as of January 19, 2022.

The order does not accuse Helium Systems, Inc., the developer of HNT, or any
employee of the company of dealing in securities in Texas or violating state
securities laws.  The order only names Wireless Management and Rogers and
accuses them of illegally and fraudulently issuing investments independent of
Helium Systems, Inc.  

Wireless Management and Rogers are allegedly telling potential investors they
have secured hotspots and “top tier locations” for mining HNT.  In return for an
initial capital investment, Wireless Management and Rogers are allegedly telling
investors they will receive passive income in the form of HNT mined by a hotspot
placed at one of these locations.  The HNT earned through mining will reportedly
be evenly split—investors receive half of the rewards and Wireless Management
receives half of the rewards.

“Promoters of fraudulent investments often focus on the purported profitability
of products derived from digital assets,” said Enforcement Director Joe Rotunda.
 “In many cases, however, investors never earn these profits—and new investors
are not told that prior investors may have incurred significant losses after
purchasing other investments from the same parties.”  

In this case, the order alleges Rogers is concealing prior accusations of
misconduct.  According to the order, a prior investor filed a civil action
against Rogers, claiming he purchased an investment from Rogers after responding
to an advertisement on craigslist.org.  The investor also claimed Rogers
guaranteed the payment of a fixed rate of return, but Rogers never returned his
principal or paid the guaranteed profits.  The court ultimately entered a
default judgment against Rogers for $36,000.00 in damages and more than
$3,500.00 in attorney’s fees.    

According to the order, when the Enforcement Division began investigating
Wireless Management and Rogers, the Enforcement Division afforded Wireless
Management and Rogers the opportunity to become compliant with the law.
 Although they promised to become compliant, Wireless Management and Rogers
nevertheless continued to illegally and fraudulently offer securities in Texas.
 Commissioner Iles entered the order after determining their conduct now
threatens immediate and irreparable public harm.

Wireless Management and Rogers are not registered to sell securities in Texas,
Wireless Management has not registered the turnkey investment with the
Securities Board, and the agency has not permitted the investments for sale in
Texas.  In addition to violating state registration laws, the order accuses
Wireless Management and Rogers of concealing material risks associated with the
turnkey investment and deceiving investors about their technical knowledge.

CONTACT:  Joe Rotunda, Director of Enforcement, Texas State Securities Board, by
electronic mail at jrotunda@ssb.texas.gov.  
 


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