Federal agencies in the United States are going after two siblings for allegedly defrauding thousands of investors through a Ponzi scheme packaged as a digital currency project and a block reward mining venture. The two defrauded $124 million from investors while falsely claiming in roadshows and YouTube videos to be generating millions in mining and to be backed by mega-firms.
The U.S. Securities and Exchange Commission (SEC) announced its charges against John and JonAtina (Tina) Barksdale on March 8, accusing them of defrauding thousands through two unregistered fraudulent securities offerings involving Ormeus Coin.
In its charges, filed with the Southern District Court of New York, the watchdog claimed that the two siblings had been defrauding investors since June 2017, selling their ERC-20 token on trading platforms. In addition, they sold subscription packages that included the token as well as an investment in a digital asset trading program.
To lure investors, the two relied on roadshows around the world and extensive use of social media, YouTube videos, and blog posts. They claimed that their firm was backed by one of the largest mining operations in the world, despite their own mining venture dying off in 2019 after generating just $3 million.
They still told investors that Ormeus Coin had a $250 million mining operation that produced $5.4 million to $8 million per month in revenues.
To keep their Ponzi scheme secret, the Barksdales included a digital wallet in their public website of an unrelated third party that showed a balance of more than $190 million in digital assets as of November 2021. At the time, the project’s actual balance was less than $500,000.
The Associate Director in the SEC’s Enforcement Division, Melissa Hodgman, described the two siblings as “modern-day snake-oil salesmen” who relied on social media and roadshows to lure investors.
“We will continue to vigorously pursue persons who sell securities in schemes to defraud the investing public no matter what label the promoters apply to their products,” she added.
In an accompanying indictment, the Department of Justice (DoJ) charged John with one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud, securities fraud, and wire fraud. The four charges carry a maximum of 65 years in prison.
“Together with our law enforcement partners here and abroad, we will work tirelessly to prosecute those who commit frauds against the public in connection with the sale of cryptocurrencies,” U.S. Attorney Damian Williams stated, commenting on the indictment.
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