As you may recall, last July the Texas State Securities Board (TSSB) issued a notice regarding three of our cryptocurrency mining products that were offered in Texas. We disputed the core allegations in the notice and presented to the TSSB what we believe are compelling arguments why the products are not subject to securities laws in Texas.
We could have proceeded to a hearing to have a neutral arbitrator decide who was right. But we recently decided that it is in the best interest of our business and our Affiliates to settle the issue directly with the TSSB and move on. So on Feb. 21, 2019 we consented to the entry of an agreed order in which the TSSB clears Nui of all fraud charges related to our cryptocurrency mining business and removes Kala mining rigs from the order. It also concludes that two of the products should have been registered as securities before being sold to Texas residents and that we should have registered in the state before offering the products for sale in Texas. We disagree with the conclusion that the TSSB reached but are pleased that the matter is behind us.
Going forward, we have made a business decision to not offer any products to Texas residents and we ask our Affiliates to not solicit Texas residents. Failure to abide by this request can result in termination or suspension of the offending Affiliate’s membership in Nui. Please know that we strive to abide by all relevant laws and regulations and will continue to do so. We appreciate your business and look forward to working with you. If you have any questions about the TSSB settlement or our product offerings, please don’t hesitate to contact us.
Questions & Answers
What two products are considered securities? Which one was not?
Last July, Texas issued an emergency order in which it identified three mining products that it believed are securities under Texas law: 1) the 3-year hash rate rental agreements; 2) the open-ended hash rate rental agreements; and 3) the offer of Kala mining rigs. The emergency order was based on Texas’s own investigation that it conducted without notifying Nui or receiving Nui’s feedback. After the order was issued, Nui met with Texas to provide feedback, clarify certain facts, and share its views regarding the application of Texas securities laws to the three products.
After Nui met with Texas and discussed the facts and law, Nui and Texas both decided that it was in their best interest to settle the matter rather than litigate it. In the order that Nui consented to on Feb. 21, 2019, Texas concluded that the 3-year and open-ended hash rate rental agreements are securities. Nui does not agree with this conclusion, but decided to settle the matter rather than contest it at a hearing. Texas agreed with Nui’s assertion that the Kala mining rigs are not securities, and they therefore are not included in the order.
How does this affect the Kala coin and Kala mining?
The agreed order does not discuss or affect either Kala coins or Kala mining. However, Nui has determined that it is in the company’s and Nui’s affiliates’ best interest to stop offering all products in Texas. This is a business decision, not something required by the order. Neither the emergency order nor the recently agreed order addressed Kala coins.
How does the order affect what is happening in other states?
The agreed order is only effective within Texas and reaches conclusions only under Texas law. Accordingly, it does not impact what is happening in other states.
Was Nui cleared of all fraudulent allegations?
Yes. The emergency order that Texas issued last year contained allegations of fraud that Nui vehemently denies. Nui took these allegations very seriously and responded to them with force. After Nui and Texas met, Texas agreed to remove any allegations of fraud from the agreed order. The agreed order contains only registration violations, not fraud violations.
What does this mean for all Texas residents that purchased 3-Year and Open-Ended contracts?
As part of the settlement with Texas, Nui agreed to make an offer of rescission to Texas residents who purchased those products. Nui is in the process of communicating with Texas residents to make this offer.
Do members in other states get the same recession?
Under the terms of the settlement with Texas, the rescission offer is available only to Texas residents. It is not available to residents of other states.