TEXAS–The Texas State Securities Board entered an emergency cease and desist order against Southlake-based Balanced Energy LLC Monday after making public claims to be the first in the energy industry to accept Bitcoin transactions from investors. The filing asserts that Balanced Energy is not following protocols that ensure potential investors are financially accredited or apprised of the risks involved.
Balanced Energy promoted investor offerings in two oil well prospects in western Texas at a recent Bitcoin conference to a general audience–not necessarily accredited by the Texas securities authority. The company offered graduated ownership interest purchases with potential high-yielding returns prior to seeking approval from the state. Though such activity is not out of bounds–according to the filing–Balanced Energy allegedly failed to ensure that investors met state wealth and capital standards prior to advancing offers.
Current law requires that “accredited investors” must maintain a net worth of at least $1 million–separate from the value of their primary residence–or have at least a $200,000 annual cash flow.
According to the order, the Runnels County working interests, “the South Runway Prospect and the North Guitar Prospect have not been registered by qualification, notification or coordination, and no permit has been granted for their sale in Texas.” Further, the order quotes Balanced Energy President Kirk Johnson admitting to not performing “any verification,” asserting an unwillingness to “play paperwork police.”
Texas alleges the company is “engaging in fraud in connection with the offer for sale of securities.”
As a point of fact, the State Securities Board does not raise a direct code violation simply due to the use of Bitcoin. The order echoes recent general warnings from the State to avoid the use of the controversial digital currency. In a February press release, Texas Securities Commissioner John Morgan argued, “In many ways, digital currencies operate as ‘online cash,’ only this type of currency is extremely volatile and can disappear the same way your money disappears when you lose your wallet.”
The State reiterated its concerns in this specific case, “Balanced Energy has failed to disclose to investors the risks in using Bitcoin to purchase working interests in wells.” The board adds, “The price of digital currency is subject to extreme swings, which could affect the amount of money available for business operations.”
Balanced Energy LLC has 30 days to respond to the order and seek a formal hearing, according to a discussion between Breitbart Texas and the securities board. The company’s Facebook page does not currently offer a response to the recent order. Balanced Energy LLC has yet to respond to email requests for comment submitted by Breitbart Texas.
The controversial digital currency has suffered a number of public relations scars in recent weeks according to previous reporting by Breitbart News. Two major exchanges–Mt. Gox and Flexcoin–have shut down due to hacking and server failure.
Follow Logan Churchwell on Twitter @LCChurchwell
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