DavorCoin, the money lending platform which offered interest in return of users’ investments, has now been declared to be running a ponzi scheme by the state of Texas. The state has sent out a cease and desist notice to the company, ordering them to immediately halt all operations in the state of Texas and dealings with those living in the state.
The platform was quite similar to BitConnect, which had been banned a few weeks earlier under similar circumstances. Interestingly, it was the state of Texas which was the first US state to issue a cease and desist notice to BitConnect before other states followed. Texas is the first state in the case of DavorCoin as well and other states are likely to follow.
Ever since the BitConnect scam, governments of various US states have been quite alert when it comes to ponzi cryptocurrency based platforms. Considering that last year there was a major rise in awareness around cryptocurrencies, a lot of first time investors got into the market and started investing without realizing what they were getting into. Many investors tend to invest in these scammy, fake platforms and end up losing their money.
When BitConnect eventually shut down last month, DavorCoin continued its operations and even released a statement saying ‘this does not change anything for us’. The platform claimed that it was the number one lending platform in the world. After studying the way they operate as well as going through their shady, unclear registration details, the state of Texas declared that many claims and statements made by DavorCoin were “materially misleading or otherwise likely to deceive the public.”
Another major allegation against DavorCoin is that it isn’t clear as to who runs the company and where it is actually registered as there are many obscure details about it. Moreover, while their registration details are unclear, they don’t even require much of an information from the users registering on their platform as well. There was no proper KYC process while registering for the platform.
DavorCoin’s modus operandi was quite similar to that of BitConnect. Users would buy DavorCoin tokens from their internal cryptocurrency exchange (or from other exchanges which had listed the currency) and would then have to make use of these tokens to invest into the platform. The more you invest, the higher your interest rate was promised. The platform also offered another system where you could lock-in your investment for a fixed number of days. Locking-in your investment for 120 days would offer you $513 per day in return.
With schemes like these, DavorCoin was all set to become the next BitConnect but the state of Texas has halted the growth of this platform. DavorCoin has a number of active communities where unsuspecting users are not just investing in the platform, but are promoting and defending them as well.
The state pointed out that the price of the DavorCoin cryptocurrency was extremely volatile. The currency was priced in at $21.39 on the 29th of January and had reached $6.76 on the 1st of February. The state of Texas, in their cease and desist notice have ordered DavorCoin to immediately stop all operations in the state of Texas.