Massachusetts regulators are stepping up their aggressive measures to stop startups from selling digital tokens and currencies online to raise money and attract users.
Secretary of State William Galvin’s office announced Tuesday it had ordered five firms to halt so-called “initial coin offerings” that officials said amounted to the unregistered offering of securities.
“I encourage anyone in Massachusetts who is thinking of investing in these new initial coin offerings to make sure the people they are giving their hard-earned money to are legitimately doing business,” Galvin said, describing the sales as get-rich-quick “schemes.”
Companies around the world have collectively raised billions of dollars through such coin offerings, in which they sell tokens built on software similar to the technology supporting bitcoin. Authorities in multiple countries have been struggling to regulate the practice.
Though the hot market for digital currencies has drawn scammers and speculators into the trade, many companies say they don’t believe they are selling securities because their tokens are not intended as investments, but rather for use with a service or technology that they also offer.
One of the companies targeted by Galvin, Newton-based 18moons, told the Globe in January that it planned to raise as much $10 million in a coin offering, and use the money to build a platform where people could buy and sell children’s programming. A company official had no immediate comment Tuesday.
Galvin’s office said it had also stopped ICOs by Mattervest of Belmont, Pink Ribbon ICO of Marston Mills, Across Platforms of Boston, and Sparkco Inc. of Cambridge.
The announcement follows an action in January in which Galvin’s office filed administrative charges against Caviar, a real-estate business that was selling cryptocurrency to support its efforts.