Sen. Tommy Morrison has confirmed his affiliation with USI-Tech – the cryptocurrency trading company now in the hot seat over claims of an alleged Ponzi scheme utilizing investment packages marketed by the company.
Morrison told The Guam Daily Post that he had been a customer of USI-Tech since April 2017 and has participated in the bitcoin and blockchain space for the last few years.
The senator is referred to as an "independent promoter" by USI-Tech. The company has made promises of up to a 35 percent commission to its promoters.
Morrison was one of five administrators to a USI-Tech Guam Facebook group that no longer appears to be available on the social media platform.
He also authored language in the 2017 budget law that "requires GovGuam to identify trends and advances in information technology that may be available to support a more convenient and efficient payment system."
His legislative amendment advocated for cryptocurrency as "an alternative" to paper checks and credit card payments that the local government should consider.
In a statement yesterday, Morrison described himself as a customer – rather than a promoter – of the investment package that's being sold by USI-Tech, which the Texas securities board has banned from the state.
Morrison stated only "certain affiliates" are under investigation, but the Texas securities board's Dec. 20, 2017, emergency cease-and-desist order bans the entire USI-Tech organization from marketing and selling to the state's residents.
"Like other USI-Tech customers on Guam and in the U.S. mainland, I'm very concerned about the allegations made recently against certain affiliates of the company. From what I understand, owners of the company and their legal team are investigating the situation – and will hold those who've violated the agreed upon terms and conditions accountable for their actions," Morrison stated.
"Bitcoin, cryptocurrency and blockchain technologies are a global phenomenon and uncharted territory that has the world excited," Morrison stated.
'Attempting to deceive the public'
The Texas State Securities Board issued its emergency cease-and-desist order against USI-Tech over several alleged violations.
"The sales agents are attempting to deceive the public by claiming that USI-Tech has a 'binding legal opinion' from a law firm stating the company is 'a legal business in good standing,'" the board stated, in part.
USI-Tech has isolated the issue, not as a company-wide problem, but as a result of sales distributors who didn't follow the rules. The company announced through a "Dear customer" letter that it has decided to sever ties with its sales "distributors" in the U.S. and Canada over alleged false advertising.
"We were utterly dismayed to learn that a large number of our sales partners extensively advertise our services on their own websites as well as on social media in a manner which is a breach of contract as well as illegal, and which gives the appearance that our service portfolio violates both U.S. and Canadian law," according to the USI-Tech announcement that had circulated online.
According to the Texas securities board order, USI-Tech "is telling potential investors they can make more money by convincing other individuals to invest in the company's bitcoin platform." The board stated investors were told they can earn "up to 35 percent commissions" through its "unique referral marketing plan."
Local marketing pitch
In a Guam marketing pitch last year, promoters showed a video presentation promising returns of a whopping 140 percent after 140 working days of their initial investment.
A concerned Guam citizen, Cyrus Luhr, has voiced concern to local authorities this could be a Ponzi scheme. Investors are being sold "packages" of investments into USI-Tech, which doesn't make investors directly own bitcoins, but supposedly makes them invest in USI-Tech's involvement in "mining" cryptocurrency.
The U.S. Securities and Exchange Commission has warned against bitcoin Ponzi schemes. In a recent case, SEC v. Shavers, the organizer of an alleged Ponzi scheme advertised a bitcoin "investment opportunity" in an online bitcoin forum.
"Investors were allegedly promised up to 7 percent interest per week and that the invested funds would be used for bitcoin arbitrage activities in order to generate the returns," according to the SEC. "Instead, invested bitcoins were allegedly used to pay existing investors and exchanged into U.S. dollars to pay the organizer's personal expenses."
Local investors hold fast
Regardless of the allegations on Guam, some investors remain committed to the company, posting #IStandWithUSI on social media platforms.
Roy Gamboa, an affiliate of USI-Tech, explained the role of certain USI-Tech customers in a comment on a prior Post story. Company officials have visited Guam and their product is advertised by certain businesses, but USI-Tech does not have a business license on island. Gamboa explains why one is not necessary.
"We are all customers. We aren't selling anything," Gamboa stated. "We merely introduce potentially interested individuals to a product. The purchase is between the individual and USI-Tech, which does not occur on Guam. It occurs online."
The Office of the Attorney General has stated it's aware of the issues surrounding USI-Tech.
Michele Ernst of the FBI said the agency can't confirm or deny any investigation into the company.