Resolution no. 20693

Suspension pursuant to Article 99, paragraph 1, letter b), of Legislative Decree no. 58/1998, of the offering to the public of the 'Crypton' cryptocurrency

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 NOTED that supervision by CONSOB has resulted in the acquisition of evidence about a business activity consisting of also proposing to Italian residents to invest on the purchase of a cryptocurrency called 'Crypton' with the prospect of high returns;

HAVING FOUND that the https://cryptoforce.world, also available in Italian, states that the Cryptoforce Ltd company, with offices in Belize, 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'. In particular, the said website states that 'Cryptoforce provides passive income in the form of Proof-of-Stake mining, that is available to all holders of the Crypton coin', and promises passive income proportional to the amount of coins in one's wallet;

HAVING ESTABLISHED that with reference to return on the investment, the said website reads '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 referals';

HAVING ESTABLISHED that in addition to these investments related to the purchase of 'Crypton' cryptocurrency, the opportunity is offered to receive extra bonuses linked to an affiliation scheme;

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

HAVING ESTABLISHED that the operation is presented as an investment opportunity, since the scheme promoted by Cryptoforce Ltd, aimed to the launch of the new 'CRYPTON' cryptocurrency, seems to envisage the possibility for users to receive, after prior purchase the aforementioned cryptocurrency, regular returns correlated with the quantity of cryptocurrency held, generated by an algorithm and proportional to the cryptocurrency purchased.

HAVING ESTABLISHED that, according to the definition in Art. 1, para. 1, lettert), of the Consolidated Law on Finance, 'public offering of financial products' means 'all and any communication addressed to people, in any form and via any medium, that gives sufficient information on the conditions of the offer and the financial products offered as to put an investor in a position to decide whether to buy or underwrite such financial products including placement through licensed parties';

CONSIDERING that the elements of the offering to the public that are relevant for the purposes of the aforementioned provision can be summarized as follows:

i. The activity in question involves one or more '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”;

ii. The existence of communication intended to persuade investors to purchase or subscribe to one or more financial products and, consequently, including at the very least a description of their main characteristics and essential conditions;

iii. The uniform and standardised formulation of the offering makes it impossible for the individual investor to intervene on the formation of the contractual agreement and on the subsequent use of the money paid;

iv. The said offering 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 directly connected and related to the investment of capital;

HAVING CONSIDERED that the transaction structure in question envisages a) that the users use their own capital for the purchase of the 'Crypton' cryptocurrency b) that a pre-determined return is promised on the said purchase, c) with consequent assumption of a 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 recipients of the return themselves, who, therefore, provide their own money with an expectation of earning a profit, namely the growth of the capital invested;

HAVING CONSIDERED, therefore, that the investment that is the subject of the offering in question meets the requirement referred to in letter a), i.e., can be classified as a “financial product”, since in the light of the above, it appears to possess the characteristics of “an investment of a financial nature”;

HAVING ESTABLISHED that Cryptoforce Ltd promoted the said offering in a uniform and standardised manner, through a presentation that illustrates the characteristics of the related investment scheme in such a way that investors are made able to assess whether to join it or not;

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

HAVING ESTABLISHED that the offering in question is also addressed to the public resident in Italy, because the https://cryptoforce.world website is also available in Italian;

HAVING FOUND, therefore, that the requirement set out in letter d) is met, since the offering in question is also made to the Italian public;

HAVING FOUND, therefore, that the activity put in place by Crypton Ltd for promoting the purchase of the 'Crypton' cryptocurrency consists in offering financial products to the public, as defined above;

HAVING CONSIDERED that Art. 94, para. 1, of the 'Consolidated Law on Finance' provides as follows: 'Those who intend to make an offer to the public shall publish a prospectus in advance. 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 above, neither prior notification was made nor the information prospectus intended for publication were sent to CONSOB;

HAVING ESTABLISHED that the offer in question, on the basis of current evidence, does not qualify for any of the exemptions from enforcement of the rules on 'solicitation of public savings' - 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;

CONSIDERING, therefore, that there is a well-founded suspicion about the promotion of a public offering of financial products in infringement of the aforesaid rules and regulations and that the public offer of financial products at issue is still underway;

HAVING REGARD to Art. 99, para. 1, letter b), of the Consolidated Law on Finance, according to which CONSOB may: 'by way of a precaution, suspend for a period of up to ninety days any offer of products other than those referred to in Letter a) [i.e., EU financial instruments] if there is the founded suspicion of the infringement of the provisions of this paragraph or of the relative implementing regulations';

HAVING CONSIDERED that, given the existence of the above-mentioned conditions, there is the urgent need to apply the measure identified above;

HEREBY RESOLVES:

To adopt the precautionary measure of suspending for a period of 90 days the offering to Italian residents related to the purchase of the 'Crypton' cryptocurrency put in place by Crypton Ltd through the https://cryptoforce.world website.

This Resolution shall be published in CONSOB's Bulletin.

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

November 14, 2018

THE DEPUTY CHAIRMAN
Anna Genovese