The U.S. Securities and Exchange Commission (SEC) has won a legal battle against siblings John Barksdale and JonAtina (Tina) Barksdale, who allegedly orchestrated a massive crypto asset fraud.
On March 15, 2023, the U.S. District Court for the Southern District of New York entered a final judgment against the defendants, ordering permanent injunctions, disgorgement with interest, and civil penalties.
According to the SEC’s complaint, the Barksdales raised tens of millions of dollars through two unregistered fraudulent offerings of securities involving a crypto asset called “Ormeus Coin” between June 2017 and March 2022.
The SEC also alleged that the defendants falsely claimed that Ormeus Coin was supported by one of the largest crypto asset mining operations in the world, even though they abandoned their mining operations in 2019 after generating less than $3 million in total mining revenue. The defendants allegedly used roadshows around the world and social media posts, YouTube videos, press releases, and other promotional materials to promote the offerings.
The judgment, entered on the basis of default, enjoins the Barksdales from violating the antifraud provisions of the Securities Act of 1933 and Securities Exchange Act of 1934, and Rule 10b-5 thereunder. It further enjoins them from violating Section 5 of the Securities Act by engaging in the unregistered offer or sale of securities.
The Barksdales were ordered to pay disgorgement of $46,297,463 on a joint and several basis and prejudgment interest of $10,044,822. The Barksdales were also ordered to each pay a civil penalty of $23,148,731.
The SEC’s investigation leading to this action was conducted by Matthew Reisig and supervised by Timothy England and Melissa Hodgman. Christopher Carney and Matthew Reisig led the litigation, which was supervised by Melissa Armstrong.
The cryptocurrency market has seen explosive growth in recent years, with the total market capitalization of cryptocurrencies surpassing $2 trillion at one point. However, the market is largely unregulated, making it a fertile ground for fraudsters to carry out scams and exploit investors.
In light of this, regulators across the globe are stepping up their efforts to monitor and regulate the cryptocurrency market. The SEC has been actively pursuing cases of cryptocurrency fraud and has been working to establish clear regulations for the market. The recent court ruling against the Barksdale siblings serves as a reminder that fraudulent activities will not go unpunished, and investors need to exercise caution while investing in cryptocurrencies.
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