The Hook
On April 10, 2018, as Bitcoin traded at roughly $6,835 — a shadow of its December 2017 peak near $20,000 — a bombshell report from the Texas State Securities Board laid bare an uncomfortable truth about the crypto ecosystem: fraud was not the exception. It was the norm.
The Enforcement Division of the Texas State Securities Board had spent four weeks investigating cryptocurrency investment promoters targeting Texas residents. What they found was staggering in its breadth and brazenness. Of 32 promoters scrutinized, not a single one was registered to sell securities in the state of Texas. The report, titled “Widespread Fraud Found in Cryptocurrency Offerings,” became one of the most significant regulatory warnings of the post-boom correction era.
On-Chain Evidence
The numbers tell a damning story. At least five of the 32 promoters investigated guaranteed eye-popping returns of up to 40 percent per month while failing to disclose any of the material risks associated with cryptocurrency investments. Nearly two-thirds of the promoters — roughly 21 out of 32 — did not even provide a physical address, leaving investors with virtually no recourse once the inevitable losses materialized.
Bitcoin was already reeling from a 65 percent decline from its all-time highs. Ethereum sat at $414, down dramatically from its own peaks. The total cryptocurrency market capitalization had shed hundreds of billions of dollars since January. Yet promoters continued to dangle extraordinary returns, often leveraging Bitcoin’s fame to sell investments that had nothing whatsoever to do with the flagship cryptocurrency.
The Core Conflict
The Texas report exposed a particularly insidious dimension of crypto fraud: the weaponization of trust. Many of the investigated promoters used handsome photographs and glowing professional credentials on their websites to create an illusion of legitimacy. But behind the flashy graphics, as the Board warned, virtually anyone from anywhere may be lurking.
The case of LeadInvest became a poster child for this deception. The Texas State Securities Board had taken emergency action against the firm, and investigators discovered that one of its listed principals — a certain Lucy Besson, described as responsible for cryptography and data analysis — was actually represented by a stock photograph of a model. If that was not audacious enough, the company’s Code of Ethics Association page featured a photograph lifted from a decade-old George Washington School of Law publication. The image included former U.S. Solicitors General and Supreme Court Justice Ruth Bader Ginsburg — none of whom had any connection to LeadInvest.
Market Implications
The Texas findings came at a pivotal moment for the broader cryptocurrency market. With Bitcoin hovering around $6,835 and the speculative mania of late 2017 fading into painful memory, the report underscored a critical gap between the promise of decentralized finance and the reality of a largely unregulated marketplace flooded with bad actors.
The Board also warned that individual retail investors were being recruited as marketers, promised finder’s fees for luring friends and family into crypto schemes. Without proper licensing, these individuals faced severe consequences including administrative, civil, or even criminal actions — yet many had no idea they were exposing themselves to legal jeopardy.
The report highlighted another risk left unspoken by promoters: the persistent threat of hackers penetrating security systems and either disrupting investment programs or absconding with cryptocurrency holdings entirely. In a market still reeling from exchange hacks and Ponzi scheme collapses, the Texas regulator’s warning served as a sobering reminder that the price chart told only part of the story.
The Verdict
The Texas State Securities Board’s April 2018 investigation was a watershed moment in crypto regulation. It demonstrated that the cryptocurrency investment landscape was riddled with fraudulent actors exploiting the gap between public enthusiasm and regulatory oversight. The CoinMarketCap snapshot from that same day — Bitcoin at $6,835, Ethereum at $414, XRP at $0.49 — captured a market in transition, caught between the speculative excess of the boom and the painful correction that was still unfolding. The report would prove to be an early harbinger of the regulatory crackdown that would define much of the crypto narrative for years to come.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Past market conditions do not guarantee future results. Always conduct your own research before making investment decisions.
btc at $6,835 and scammers were still finding enough victims to run 32 separate operations. desperation makes people stupid
32 out of 32 promoters unregistered. 100% failure rate. the texas report should be required reading for anyone buying crypto investment products
the fact that this was just texas alone tells you the national scope of the problem was probably 10x worse
40% per month returns guaranteed and no physical address for two thirds of them. the red flags were literally neon signs and people still wired money
guaranteed returns plus no address is literally every MLM scam since the 90s. crypto just made it faster
exactly the same playbook. the crypto wrapper just made it feel new and techy. same victims, different buzzwords
my cousin lost $12K to one of these promoters. promised daily payouts, disappeared after week two. texas did more than the SEC ever did for retail