The Enforcement Division of the Texas State Securities Board (TSSB) has published the findings of its four-week investigation into “suspect” securities offerings tied to cryptocurrencies, in a report released April 10.

Starting Dec. 18, 2017, the division opened 32 investigations into promoters of crypto investments, none of whom were registered to sell securities in Texas and therefore – given that they were selling securities under Texas law – were operating “outside the law.”

The report contended that “the revolution in digital money is creating an environment ripe with illegal and fraudulent securities offerings,” in which “new technologies” are converging with the “same old emotions” to push investor enthusiasm into overdrive, amid “abundant signs of a cryptocurrency mania.”

The report highlights key areas of concern, with promoters “almost universally” touting unrealistic profitability and downplaying investment risks. Others misappropriated or faked identities, or offered unscrupulous “finder’s fee[s]” to lure recruiters in.

The report includes five detailed case studies: R2B coin, Davorcoin, LeadInvest, USI-Tech Ltd, and Bitconnect, all of whom were issued emergency cease and desist orders by the TSSB between Dec. 2017 and Feb. 2018. The last of these, Bitconnect, lost 98% of its market cap after the TSSB emergency action. The report warns that the other four companies faced similar fates, with many investors subsequently losing “almost all of their investment capital.”

The TSSB concludes by urging investors to conduct due diligence into sellers of crypto investment products, reminding them that they are entitled to the protections of securities regulations.

Cryptocurrencies and digital tokens are defined differently by various regulatory bodies in the US, pushing businesses to seek more clarity from regulators, as they did in a Congressional hearing in mid-March. Tokens launched during ICOs have so far been a particular focus for securities regulators, but a host of crypto assets and contracts are now classified as securities worldwide.