THE FUTURE OF USITECH IN AUSTRALIA
DISCLAIMER
I believe prior to buying my USITech packages I used due diligence. In fact I resisted until I had an allocation of the required 5% of my capital. Just as I carefully analyse an ICO, I proceeded once all routine investigative objectives were fulfilled. I was and continue to be satisfied with my decision.
I usually begin disclosing that I am not giving financial advice, so again I am not giving you financial advice. In this instance, I follow by saying that I am not a legal expert but use common sense and observe the involved fine details. In no way am I making promises of an event nor am I guaranteeing any outcome or experience.
PART ONE
Failures in a company
When looking at the failure of a business you will more than likely find that the responsible party/parties are either:
1a: Part of the opposition.
You will find many of USITech’s opposition (those in similar company’s) frequently blog ‘USITech is a scam’. I feel I do not need to reference this as it is common knowledge. I feel it is essential to establish that what the media delivers is not always fact. In the US cryptocurrencies are under far more regulation and opposition than Australia. It is also possible for one to imagine this story has more depth considering the distributors in question have not yet responded and we are relying on both the Texas local authorities and some small comments from USITech themselves. I can only take as ‘fact’ what is presented to me as fact.
1b: Failing to communicate and manage
I have worked for mining companies, radio stations, community services and in building design to name a few. In EVERY instance, the decisions made by management directly impacted on the performance and outcomes of staff. In USITech’s case, their main failure was in their lack of customer service and overall regard for their customers during their migration to their new back-office. “For the success of a company, dialogue is key. And 140 character tweets don’t count. Real dialogue with real customers” (The Cluetrain Menefesto ref 1). This period of time was painful for thousands of users and the struggle was real for anyone invested in USITech.
1C: Part of the breakdown of leadership
This does not mean that the guys at the top are bickering endlessly. It means that if any key player is self-sabotaging or unfocussed the result is that we will see poor decision making and a weak link. There is a domino effect.
Now you’re saying, well actually USITech didn’t fail because of all that. Perhaps you’re right but an outcome has been observed of actions that are not yet apparent and this outcome has some key elements associated with a poor business model and a failure in leadership.
The fact is that the blame has been cast on distributors failing to follow the rules that were not stressed enough or at all in the first place. Many distributors simply ‘click’ a button on a website to become on a ‘distributor’ without understanding the contract assigned to that role. In fact, no contract can be found in the dashboard or enrolment emails. For a distributor this was a plus especially considering that having no contract offers freedoms that would otherwise be prohibited, hence the misunderstanding that advertising may have been acceptable. This is a major failure of communication, management and customer support on USITech’s part. As mentioned, a key to any successful company is communication, leadership and management. The effects can be seen by distributors desperate for sign-ups using social media and private websites offering securities and financial assets. Therefore the onus remains on USITech.
PART TWO:
USITechs cease and desist - The comparison between US and Australian applicable law.
2a: Selling securities
According to the emergency cease and desist order (ref 2) issued by Texas State Securities Board (ref 3) there were two distributors who were not registered to sell securities in Texas. In the USA securities are a legally-enforceable promise which can be traded, sold, or otherwise exchanged for financial gain. Simply a tradable financial asset. The two USITech distributors were said to be making promises on returns for investment with financial assets.
In Australia, similar regulations can be found in ASIC’s (Australian Securities and Investment commission) Regulatory Guide 36 ‘Licensing: Financial product advice and dealing’ (ref 4) Whereby they state ‘you provide a financial service if (among other things) you: ‘provide financial product advice’; or ‘deal in a financial product’. It is essential to remember, that if a USITech distributor falls into these categories they will likely be in breach of the Corporations Act 2001 to which the above regulation applies.
2b: Earning commissions
The two distributors were also promoting the commissions for referrals on Craigslist and their own private websites (The equivalent to our Gumtree in Australia). In the US Individuals paid these commissions must either be registered with the State Securities Board or qualify for an exemption from registration.
After a tiring night of research I am fairly certain that in Australia, to earn commissions it is not necessary to register with your state. However taxation may affect you as you have to declare all income to the ATO including affiliate incomes (unless you are below the tax free threshold). More importantly, if you are a trader, converting Bitcoin to Australian dollars will be taxable as capital gains unless you have held for more than 12 months and are eligible for a discount. Simply owning Bitcoin personally offers an exemption if your profits are less than $10,000.
Unfortunately for USITech, the distributors were not all to blame for the order. At the time of the Cease and Desist order, USITech had advertised on their website that “customers have enjoyed profits of up to 150%” and that users can “generate up to 35% on 12 referral levels”.
2c: Failure to disclose
It is also stated in the mentioned order that USI-Tech and distributors were in violation of the Texas State Securities Board policies. According to the Texas state securities board USITech’s violations included: Withholding information on facilities used in the mining of their Bitcoin and all costs associated and whether or not USITech has the financial position which can sustain a 1% daily return. They failed to disclose material that investors require in order to make informed decisions about the investment.
As mentioned in 2a, In Australia, when “you provide a financial service if you “provide financial product advice”; or “deal in a financial product”. This means that by advertising returns on investment, USITech fall into a financial services provider role. The key word in all of this is investment as it directly relates to finance. Offering a financial product requires the owner to release a disclaimer outlining all risks and liabilities. The laws associated with dealing in a financial product are similar in Australia and disclosure is also required.
2d: Legality of Bitcoin packages
The two distributors are said to have advertised that the Bitcoin Packages (BTCP) were certified legal products in the USA per the Federal Trade Commission (FTC) however the FTC has no jurisdiction over Bitcoin Packages. It was the state securities board who were required to register the product and unfortunately USITech did not register Bitcoin Packages with them.
In Australia, Bitcoin packages are unregulated however Bitcoin and other cryptocurrencies are currently seen as an investment and as ASIC (ref 5) points out you will need to pay capital gains taxes on any Bitcoin investments. There appears to be no onus on USITech to register Bitcoin Packages as a product at this time.
CONCLUSION
In summary, USITech has failed its distributors in the US and Canada firstly by withholding contractual and legal information imperative to their investments and secondly failing to support the distributors who were without guilt upon USITech’s exit.
In my opinion, this conclusion is not fact nor should it be taken as such however my opinion is the future of USITech in Australia appears to have a greater likelihood of survival considering Australian legislation has not yet been applied to a majority of cryptocurrency applications. It should be noted however that advertising to anyone about USITech investments, returns on investment and commissions for affiliation should be avoided unless you are registered with ASIC as a financial services provider. Even if you are a financial services provider, a very intensive disclosure statement is required for your financial safety.
References:
1 - https://www.amazon.com/The-Cluetrain-Manifesto-Anniversary-Edition/dp/0465024092/ref=pd_sim_sbs_b_1
2 - https://www.ssb.texas.gov/sites/default/files/USI-Tech%20ENF-17-CDO-1753.pdf (youll need to copy and paste this one)
3 - https://www.ssb.texas.gov/news-publications/bitcoin-promoter-usi-tech-hit-emergency-order
4 - http://download.asic.gov.au/media/3889417/rg36-published-8-june-2016.pdf
5 - https://www.moneysmart.gov.au/investing/investment-warnings/virtual-currencies