Cloud mining service Genesis Mining has been told to stop operating in the state of South Carolina, according to a cease-and-desist order released on March 9.
Genesis and a second firm, Swiss Gold Global Inc., were named in the order, which says that mining contracts sold to state residents are considered securities.
The Securities Commission of South Carolina alleged that Swiss Gold Global acted as a broker-dealer for Genesis, but that it hadn’t registered in the state to offer securities.
“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.”
Through the contracts, buyers essentially purchase an amount of computing power over a period of time that is hosted elsewhere, as opposed to owning mining hardware themselves. In the Commission’s view, they “constitute investment contracts and are thus securities” under South Carolina law.
Both firms were ordered to stop doing business in South Carolina, according to the document. Additionally, both Genesis and Swiss Gold Global were permanently barred from offering any securities in the state in the future. That said, the companies have the opportunity to a request a hearing with state officials to present their side.
The move represents the latest cryptocurrency investment-related cease-and-desist order to come out of a U.S. state regulator in recent weeks.
To date, state officials have sent orders to a number of firms, most recently the one behind a cryptocurrency endorsed by film actor Steven Seagal.
The full cease-and-desist order can be found below:
Click to see C&D: 373640082-C-D