Resolution no. 20814

Prohibition, pursuant to Article 99, paragraph 1, letter d) of Legislative Decree no. 58/1998, of the public offering of investments of a financial nature promoted by Cryptoforce Ltd

LA COMMISSIONE NAZIONALE PER LE SOCIETÀ E LA BORSA
[THE NATIONAL COMMISSION FOR COMPANIES AND THE STOCK EXCHANGE]

HAVING REGARD TO Law no. 216 of June 7, 1974, and subsequent amendments and additions;

HAVING REGARD TO Legislative Decree no. 58 of February 24, 1998, and subsequent amendments and additions ('Consolidated Law on Finance');

HAVING FOUND that, following supervision by CONSOB, evidence was acquired of the performance of an activity consisting in offering the public, including Italian residents, the opportunity to invest money in the purchase of the 'Crypton' cryptocurrency, with the promise of rather high returns;

HAVING FOUND that, as revealed by checks on the https://cryptoforce.world website, this website is also available in Italian and is attributable to the Criptoforce Ltd. Company, with offices in Belize. With regard to Criptoforce Ltd, the said website states that is 'a technological company that has developed Crypton, a blockchain-based crypto, that uses Proof-of-Stake, where miners with the biggest amounts of staked coins have the biggest chance to generate a new block' (POS mining). In particular, the said website states that 'the company offers passive income to all CRYPTON cryptocurrency holders… Get a passive income proportionate to the amount of coins in your wallet';

HAVING FOUND that, having regard to the return on investment, the website states that 'There are two ways to receive income from CryptoForce: 01. Proof-of-Stake passive income - You can receive up to 40% per month from your Crypton POS deposit; 02. Multi Level Marketing - Attract people to company and get profit from your referrals';

HAVING FOUND that in addition to the aforesaid returns related to the 'Crypton' cryptocurrency, the opportunity is also mentioned to receive extra bonuses linked to an affiliation programme;

HAVING ESTABLISHED, furthermore, that, despite the requests by CONSOB, no useful information relating to the scheme was provided;

HAVING FOUND that the structure of the said operations is presented as an investment opportunity, since the scheme promoted by Cryptoforce Ltd for launching of the new 'CRYPTON' cryptocurrency proposes users to purchase the aforementioned cryptocurrency in order to receive regular returns linked to the amount of cryptocurrency, generated by an algorithm and proportional to the amount of cryptocurrency purchased.

HAVING CONSIDERED that, according to the definition under Art. 1, para. 1, letter t) of the Consolidated Law on Finance, 'offer of financial products to the public' must be understood to mean 'any communication made to people, in any form and by any means, that presents sufficient information about the conditions of the offer and the financial products offered as to render an investor capable of deciding to buy or underwrite such financial products, including placement by means of licensed bodies';

HAVING CONSIDERED that the elements of the public offering relevant for the purposes of the said provision can be summarised as follows:

a) the fact that the activity involves a specific or several specific 'financial products', a category that includes - pursuant to Art. 1, para. 1, letter u), of the Consolidated Law on Finance, both the typified characteristics of 'financial instruments' and 'every other form of investment of a financial nature';

b) the existence of a communication intended to persuade investors to purchase or subscribe to a specific or several specific financial products and, consequently, including at the very least a description of their main characteristics and essential conditions;

c) the representation of the offer in uniform and standardised terms and the consequent impossibility for the individual investor to intervene in the formation of the contractual agreement and on the subsequent use of the money paid;

d) the fact that the offer at issue is addressed to the public resident in Italy;

HAVING CONSIDERED that the notion of 'investment of a financial nature' implies the coexistence of the following three elements: (i) investment of capital; (ii) the expectation of a financial return; (iii) the assumption of risk connected to the investment of capital;

HAVING CONSIDERED that the structure of the operations in question envisages that (a) subscribers use their own capital for purchasing the 'Crypton' cryptocurrency (b) a pre-determined return is promised by virtue of the said purchase (c) with the consequent assumption of risk related to the use of the allocated capital;

HAVING ESTABLISHED, therefore, that the aforementioned return would be paid against the investment of the investor's capital;

HAVING CONSIDERED, therefore, that the reason of the contract in question is attributable to the production of a financial return as consideration for the use of capital entrusted by the recipient of the return him/herself, who, therefore, provides his/her own money with an expectation of earning a profit, namely the growth of the cash invested;

HAVING CONSIDERED therefore, that, with regard to the existence of the requirement referred to in letter a), i.e., the fact that the content of the offering can be classified as a 'financial product', the investment under examination, based on that explained above, appears to have the characteristics of 'an investment of a financial nature';

HAVING ESTABLISHED that the Cryptoforce Ltd. Initiative was promoted in standardised and uniform terms, through a presentation that illustrates the characteristics of the investment schemes in such a way as to make investors able to decide whether or not to join;

HAVING FOUND therefore, that the requirements set out in letters b) and c) are met;

HAVING ESTABLISHED, furthermore, that there are unequivocal indications that the offering in question was addressed to the public resident in Italy, insofar as the https://cryptoforce.world website was also available in Italian;.

HAVING FOUND, therefore, that the requirement set out in letter c) is met, given that the offering in question is addressed to Italian residents;

HAVING CONSIDERED therefore, that the activity set up by Cryptoforce Ltd. aimed at promoting the 'Crypton' cryptocurrency has the characteristics of the public offering of financial products as defined above;

HAVING CONSIDERED that Art. 94, para. 1, of the Consolidated Law on Finance provides as follows: 'Persons who intend to make a public offering shall give advance notice thereof to CONSOB, attaching the prospectus to be published. To this end, for offers concerning EU financial instruments for which Italy is the Member State of origin and for offers of financial products other than EU financial instruments, prior notification must be sent to CONSOB including the prospectus intended for publication. The prospectus may not be published until it is approved by CONSOB';

HAVING ESTABLISHED that, in relation to the activity described, neither prior notification nor the information prospectus intended for publication were sent to CONSOB;

HAVING ESTABLISHED that the offering in question, on the basis of current evidence, does not qualify for any of the exemptions - contemplated by the combined provisions of Art. 100 of Legislative Decree no. 58/98 and Art. 34-ter of CONSOB Regulation no. 11971/98 - from enforcement of the rules on 'solicitation of public savings';

HAVING REGARD TO Resolution no. 20693 of November 14, 2018, with which CONSOB, pursuant to Art. 99, para. 1, letter b) of Legislative Decree no. 58/98 adopted the precautionary measure of suspending for ninety days the offering of investments of a financial nature to Italian residents, performed through the https://cryptoforce.world website;

HAVING CONSIDERED that the Cryptoforce Ltd company, to which the https://cryptoforce.world website is attributable, has failed to respond to the facts presented as grounds for the suspension measure;

HAVING CONSIDERED therefore, that in the absence of any evidence to suggest a situation other than that outlined in the aforementioned suspension measure, the circumstances de facto and de jure established under the said suspension must be considered ascertained;

HAVING FOUND, therefore, that the public offering of investments of a financial nature in infringement of the regulations cited above has been established, according to the methods described above;

HAVING REGARD TO art. 99, para. 1, letter d) of Legislative Decree no. 58/98, on the basis of which CONSOB may 'prohibit the public offering if violation of the provisions or regulations referred to under paragraphs a) or b) are confirmed';

HEREBY RESOLVES:

To prohibit the offering of investments of a financial nature to the public resident in Italy promoted through the https://cryptoforce.world website.

This resolution shall be published in the CONSOB Bulletin.

This measure may be appealed before the Regional Administrative Court of Lazio within 60 days of the date of service.

February 14, 2019

THE ACTING CHAIRMAN
Giuseppe Maria Berruti