California's financial watchdog takes aim at 11 crypto firms operating like Ponzi schemes

California's financial regulator has issued desist and refrain orders against 11 crypto-focused firms Tuesday for allegedly breaching state securities laws. All of the companies "allegedly offered and sold unqualified securities and ten of them also made material misrepresentations and omissions to investors," the California Department of Financial Protection and Innovation ("DFPI") said in a release. "The entities are all alleged to have used investor funds to pay purported profits to other investors, in the manner of a Ponzi scheme," the watchdog said. "Furthermore, each of the entities had a referral program that operated in the manner of a pyramid scheme."Ultimately, all of the companies promised investors commissions as an incentive for them to recruit an ever-increasing number of new investors. Some of those entities, which are "classic examples of high yield investment programs," featured Elevate Pass, a crypto advertising and trading platform, Metafiyielders, a decentralized finance platform and Sytrex Trade, a crypto and forex trading platform, the DFPI said. The enforcement actions come as regulators (not just in the U.S.) aim to clamp down on illicit activities within the emerging crypto space to safeguard consumers. For instance, the Securities and Exchange Commission sued Dragonchain for its role in unregistered crypto asset securities offerings. At the beginning of August, the SEC Commission charged 11 people in $300M crypto pyramid, Ponzi scheme.