The Texas State Securities Board has issued a cease-and-desist order against an online investment entity based in the United Arab Emirates that is, according to the board, operating a Ponzi scheme luring investors to lend digital assets to Russian oil producers.
According to an enforcement action announced Wednesday, the board has ordered BigWhale.io and two individuals, Syed Sameer and Christopher Page, to cease offering securities in Texas that are not registered with the state securities commissioner and that contain “statements that are materially misleading or otherwise likely to deceive the public.” BigWhale, Sameer and Page are all identified in the cease-and-desist order as having mailing addresses in Dubai.
The order said, BigWhale, “touting its close ties with Russia,” has lured investors in Texas and elsewhere to authorize BigWhale to lend investors’ digital assets to Russian oil producers and others, promising returns of 0.8 percent to 2 percent a day – or, with returns compounded, nearly 500 percent after 90 days.
BigWhale claimed that as of this week it had paid returns of more than $6.5 million to investors.
However, the order said, an audit found that those returns were being paid, not with profits from the investment, but with deposits made by other investors — a classic Ponzi scheme.
Joe Rotunda, enforcement director for the State Securities Board, said promised returns of that magnitude are often a sign of illicit activity by the people promising them.
“All investments carry at least some degree of risk,” he said, “and the level of risk associated with a particular investment typically correlates with the promised yield. Investments that promise highly lucrative returns often carry significant risks, including the risk of losing everything.”
The state’s order said BigWhale refused to identify its principals or the location of its offices, and would not disclose details of its capitalization or “other information material to its securities offering.”
“Concealing the identity of persons entrusted with money is an enormous red flag,” said Texas Securities Commissioner Travis J. Iles. “Investors should generally avoid firms that dwell in the shadows, promoters that hide from daylight and offerings carefully crafted to avoid laws designed to protect the public. In short, offerings that operate in obscurity are best avoided.”
Rotunda said none of the targets of the cease-and-desist order is on record as being represented by any lawyers or law firm doing business in Texas.
After the release of the audit, the order said, BigWhale claimed that its website had been hacked, resulting in the loss of its funds.
Its announcement of the alleged hack said “we do have such resources at our disposal, to go after the ones who are behind this,” according to the Securities Board, and that BigWhale will “work with assets within the Russian government directly” to catch the supposed hackers.