Federal Authorities Move Against the Barksdales
The US government has charged two siblings with crimes related to running a huge cryptocurrency scam. The Securities and Exchange Commission (SEC) said that John Albert Loar Barksdale and his sister JonAtina (Tina) Barksdale broke federal securities laws and allegedly cheated more than 12,000 retail investors out of more than $124 million through the Ormeus Coin scheme. The Department of Justice (DOJ) also arrested John on charges of conspiracy, wire fraud, and securities fraud.
Both of the siblings are U.S. citizens. According to Reuters, John, 41, was living in Thailand when he was arrested abroad. JonAtina, 45, was living in Hong Kong at the time.
What Was Ormeus Coin?
In 2017, Ormeus Coin (ORME) held its first of two initial coin offerings (ICOs). The project is a BEP-20 token on BNB Chain and an ERC-20 token on Ethereum. The Ormeus Coin website says that mining started in November 2017 and used real mining machines to mine Bitcoin (BTC), Litecoin (LTC), and Dash (DASH).
Through social media posts, promotional videos, and websites, the Barksdales pushed the project hard. John also went to traveling roadshows and conferences to talk to people about the investment.
The Alleged Lies at the Heart of the Fraud
The SEC’s complaint is based on a number of claims that the siblings lied about the cryptocurrency mining operation of Ormeus Coin. Prosecutors say the Barksdales lied to investors when they said the project had spent $250 million on its mining infrastructure and was making $5 million a month.
In fact, the DOJ says that the mining operation never came close to being worth $250 million and never made more than $1 million in a single month.
The supposed trickery went even further. The project supposedly showed a vault wallet on its website that was worth more than $190 million as of last November. However, this display was said to have come from a different site that showed the balance of a wallet that had nothing to do with the project. The SEC claims the project’s actual wallets held less than $500,000.
Regulators Speak Out
Melissa Hodgman, the SEC’s Associate Director of Enforcement, was very clear in her criticism, calling John Barksdale a “snake-oil salesman.” She also said that both siblings used social media, promotional websites, and in-person roadshows to trick retail investors into giving them money.
Hodgman backed up the SEC’s general position on crypto fraud by saying that the agency will keep going after people who sell securities in schemes meant to defraud the public, no matter what promoters call their products.
John Barksdale Continued Presence
Despite the charges, John Barksdale remains listed as an adviser on both the Ormeus Coin and Ormeus Cash websites. He had previously authored a blog post in February 2018 titled “Why Taking Calculated Risks In Life Is Important.” Both siblings are currently in custody while a court date is being scheduled.
A Legal Landscape Shifting Against Crypto Fraudsters
The case comes at a time when regulators seem to be winning in court. The 11th Circuit Court of Appeals recently ruled in favor of the SEC in this case. It overturned a lower court’s decision that had kept promotional videos from being used as evidence in the securities fraud case against the founders of BitConnect.
The SEC has also been paying more attention to how cryptocurrencies are advertised in general. This week, there were also reports that the Commission is now going after non-fungible tokens (NFTs) used for fundraising. Regulators are thinking about whether these should be treated like regular securities. This shows that the crackdown on digital assets by regulators is far from over.