Securities Commissioner Travis J. Iles entered an emergency cease-and-desist order to stop South African firms from fraudulently recruiting Austin residents to participate in a cryptocurrency credit card scheme.
The order names Lance Angus Jerrard and his companies, Liquidity Gold Trust, Liquidity Gold Solution LLC, and Liquidity Global Card Solution (PTY) LTD. The order accuses them of running advertisements on 590 AM KLBJ Radio, a radio station that broadcasts in Austin. They are also allegedly promoting their scheme through internet websites and social media such as Facebook, LinkedIn and Twitter.
Their pitch is built on cutting-edge blockchain technology and cryptocurrencies. According to the order, the Liquidity companies are promoting the Liquidity Card, claiming it is a Mastercard that functions like a traditional debit card. The Liquidity Card, however, works with stablecoins, which are cryptocurrencies pegged to fiat money or other assets to minimize volatility in price. In this case, the Liquidity Card purportedly works with USD Coin (USDC), TrueUSD Coin (TUSD), and PAX Coin (PAX).
“Blockchain technology and cryptocurrencies such as stablecoins provide exciting new commercial opportunities,” said Iles. “The excitement also empowers bad actors, as they can craft fraudulent schemes to capitalize on the enthusiasm and promote a false sense of legitimacy. Schemers have weaponized current uncertainties resulting from the pandemic and other economic disruption placing Texas investors in jeopardy. Since March, the proliferation of fraudulent schemes has been unprecedented.”
The Liquidity companies are allegedly attempting to capitalize on the hype, incorporating stablecoins into traditional financial transactions. According to the order, they are touting the benefits of using stablecoins and the Liquidity Card, specifically representing cardholders can use the Liquidity Card to receive and spend profits as stablecoins, avoiding taxes that would otherwise be recognized when converting cryptocurrencies to dollars or other fiat currency.
The system only works, however, if the Liquidity companies can recruit new cardholders. They need money to recruit these cardholders, according to the order, so they are raising capital from the public – and specifically targeting Austinites – to fund their global marketing campaign. It supposedly launches in October 2020, with the goal of recruiting 8 million cardholders in 36 months.
As part of the alleged scheme to fund the marketing campaign, the Liquidity companies are selling 8,400 “portions” in their global project partnership. Each portion costs $1,150 and entitles purchasers to residual income derived from fees paid by cardholders. The Liquidity companies are projecting lucrative cashflow, claiming investors may receive $1,516.72 per portion per month after 18 months and $5,008.62 per month after 24 months.
The profits are purportedly guaranteed. According to the order, the Liquidity companies are even offering investors a 100% written money-back guarantee.
“The prospect of guaranteed monthly income may seem like a dream come true during times of economic uncertainty,” said Enforcement Director Joe Rotunda. “Unfortunately, cryptocurrency scams typically fail to support promises of prosperity with facts and evidence. In the end, it’s often smoke and mirrors with a technological twist.”
It’s also fraud, according to the order.
The Liquidity companies are accused of concealing important information about their relationships, their contracts and their compensation. They are not disclosing material information about their strategies for recruiting and maintaining cardholders. They are not providing material information about their use of money and they are not disclosing the significant risks associated with the business plan, according to the order.
They are also allegedly using stock photographs to depict their offices.
The money back guarantee? It’s part of the scheme, according to the order. The Liquidity companies are purportedly limiting the scope of the guarantee in contracts provided to potential investors, and they are not providing information that shows they can actually repay investors that demand a return of funds.
Also, Jerrard, Liquidity Gold Trust, Liquidity Gold Solution LLC, and Liquidity Global Card Solution (PTY) LTD are not registered to sell securities in Texas. Their investments are not registered or permitted for sale in Texas.
The parties have 30 days to challenge the entry of the order.