Charges Brought Against Siblings In $124 Million Crypto Scam
A complaint was this week filed in the U.S. District Court for the Southern District of New York, charging two individuals with violating federal securities laws (https://www.sec.gov/news/press-release/2022-37). The SEC have charged brother and sister duo, John and JonAnita (known as Tina) Barksdale with defrauding investors amounting to over $124 million via an Ethereum based token, Ormeus Coin (ORME).
The wide-ranging investigation covers the last 5 years, as from the summer of 2017 the siblings are alleged to have promoted and sold Ormeus Coin to retail investors. Alongside this they embarked on a multi-level marketing (MLM) scheme called Ormeus Global, in which they sold a package deal that included Ormeus Coin and a crypto trading program investment subscription. The MLM scheme was promoted aggressively, seeing John Barksdale travelling the world hosting roadshows, with Tina alleged to have overseen the digital presence of the brand, taking care of social media and YouTube amongst others.
The complaint details false claims made by the pair that Ormeus Coin is supported by one of the biggest global crypto mining operations, when in reality, the mining operations ceased in 2019 with revenues generated of under $3 million, far from the exaggerated claims amount to. In several of the scheme’s promotional materials it was claimed that Ormeus was generating up to $8 million per month from mining; so to keep up this facade the siblings allowed a cryptocurrency wallet that held almost $200 million to be linked with the scheme in promotional materials, when the information used was a completely unrelated wallet of an unconnected 3rd party.
The Ormeus Coin is still online and showing the alleged false claims, with the token currently ranking at 2,433 on CoinMarketCap and trading at a price of $0.002266 with daily volume of $10,000, down hugely from an all-time high of $5.30.
Melissa Hodgman, SEC Division of Enforcement Associate Director had strong words about the case, stating:
“… the Barksdales acted as modern-day snake-oil salesmen … to mislead retail investors for their own personal benefit. 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”
John Barskdale is also facing separate criminal charges of one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud. The potential sentence if found guilty on all counts is 65 years.
The fact that the pair are alleged to have successfully controlled a scheme as devious as this and profited so greatly from it for an extended amount of time is an indictment on the sector as a whole. The lack of adequate controls and research by investors, coupled with the malicious acts, greed, and wanton disregard for innocent investors’ funds have created an ecosystem rife with fraud. It will only be through tough sentences handed down by the courts, greatly improved education and ease of research that the trend will be reversed.
