The Securities Division of the North Carolina Secretary of State entered a temporary cease and desist order precluding Power Mining Pool from selling its securities to state residents. According to the Securities Division, PMP purported to be a mining pool that through its “mining rigs” mined seven cryptocurrencies that automatically switched operations to the most profitable cryptocurrency to transact in at the time. PMP claimed that it was a decentralized entity with no ownership by a single person or entity. PMP apparently used “affiliates” in North Carolina to sell PMP shares. The Securities Division claimed that PMP shares were securities and were required to be registered or exempt, and that affiliates that sold PMP shares also needed to be registered. The Securities Division additionally said that PMP’s offering was fraudulent in that PMP did not disclose the identity of the principals of PMP or PMP’s location, any financial information about PMP, or sufficient details regarding its mining rigs or risk factors of investing in the pools, among other information. (Mining is the process of validating transactions on a blockchain, collecting and affixing the transactions in a new block on the blockchain, and being rewarded by the blockchain with new cryptocurrencies. It is a validation of transactions methodology known as “proof of work.”)

Follow-up: The oral argument for the motion to dismiss in the criminal prosecution of Maksim Zaslavskiy for allegedly engaging in an initial coin offering of an unregistered security and securities fraud was postponed from April 27 to May 8. (Click here for details regarding this motion in the article, "Department of Justice Argues Against Motion to Dismiss Indictment of ICO Sponsor Claiming That Relevant Digital Tokens Are Securities" in the March 25, 2018 edition of Bridging the Week.)