Bitconnect, a United Kingdom company that offers trading of its own Bitcoin-like digital currency, has been issued a temporary cease and desist order by the North Carolina Secretary of State.

The company was selling securities in the state without registering to do so, a violation of the state securities act. The order says BitConnect’s offers “pose an immediate and significant danger to public welfare.”

The company sells Bitcoins, its own cryptocurrency to users who then exchange them for a BitConnect Coin.

Investors then “lend” the BitConnect Coins to the company which uses them to fund its trading activies on a proprietary, secret system it calls “volatility software.” The company’s website claims investors “will receive daily profit based on your investment option.”

NC Secretary of State Elaine Marshall said in a statement, “These specific BitConnect investment programs are very concerning from a regulatory standpoint. BitConnect offers investment programs whose returns are derived from a secret trading system about which BitConnect has failed to provide material information to investors, including evidence of its very existence.”

Reasons for the cease and desist order according to the Secretary of State:

Current speculative activity associate with cryptocurrencies makes investors susceptible to investing without performing normal due diligence.

Most cryptocurrency exchanges are unregulated and vulnerable for manipulative trading, fraud, and deception.

BitConnect omitted material facts in its offerings and made misrepresentations which make its investments particularly dangerous for the investing public.

BitConnect encourages its members to become its affiliates and therefore to act as unregistered dealers and salesmen in violation of the state securities act.

BitConnect disproportionately targets its marketing materials to children, young adults, persons of limited financial means, and unsophisticated investors who may not be able to sustain a complete loss of their investment without significant financial hardship.

The temporary order becomes permanent after 30 days unless BitConnect challenges it before an administrative law judge.