The Texas State Securities Board greatly damaged a fraudulent Arkbit cryptocurrency cloud mining operation on with a May 28 cease and desist order against Arkbit Capital for engaging in deceptive practices to perpetrate an alleged investment fraud.
The order revealed that the Texas State Securities Board, led by Financial Examiner Alexis Cantrell, uncovered Arkbit’s false claims of operating data centers in Arkansas for cloud mining various cryptocurrencies.
Arkibt Alleged of Fraudulent Cloud Mining Scheme
Arkbit falsely promised investors daily returns of 1.6% to 2.8% for 120 days on crypto deposits ranging from $50 to $49,999. Arkbit operated under the entities Arkbit Capital, Arkbit Capital Holdings, ABC Holdings LLC, and ABC Mining.
The crypto firm allegedly tricked investors using fake media assets, including one fake video of its CEO, Delmar Estabrook, speaking at a cryptocurrency conference in Austin, Texas.
State regulators found no evidence that Estabrook or Arkbit Capital ever attended the claimed event, however.
“They were peddling a cryptocurrency cloud mining fraud built on deceit and manipulation,” said Joe Rotunda, Director of the Enforcement Division at the Texas State Securities Board.
An alleged fraudster impersonating a #crypto professional being interviewed at #consensus2022 has been named in an enforcement case on the eve of @coindesk‘s #consensus2024.
Purported #cryptomining company #arkbit/#abcmining named in action. See below.
— Joe Rotunda (@joe_rotunda) May 28, 2024
The order further revealed that Arkbit’s payment processing was facilitated through CoinPayments.Net, even though the processor’s policy banned users from the United States.
The Arkbit CoinPayments account holder was traced to an individual in Hyderabad, India, rather than Arkansas as claimed.
The group’s nefarious activities represent a wider trend of alleged crypto Ponzi schemes that regulators are racing to shut down.
In March 2024, the U.S. Securities and Exchange Commission (SEC) busted a $300 million crypto Ponzi scheme called CryptoFX that targeted investors from the Latino community. This was followed by a New York jury convicting promoters behind the collapsed IcomTech as they were found guilty of conspiracy to commit wire fraud.
Also, recall that former legal executive of the OneCoin fraud scheme Irina Dilkinska was sentenced to four years in prison after pleading guilty to her role in laundering $4 billion in crypto fraud in 2019.
Texas Regulators Prioritizing Investor Protection
The regulatory action on Arkbit is part of an ongoing effort by the Texas State Securities Board and other state regulators to proactively combat crypto investment frauds and protect residents from unscrupulous actors.
Texas regulator orders Arkbit Capital to cease operations for alleged crypto scam
The Texas State Securities Board has issued a cease and desist order against crypto miner Arkbit Capital for engaging in fraudulent crypto cloud mining activities, Cointelegraph reported. The…
— CoinNess Global (@CoinnessGL) May 29, 2024
In 2018, the Texas State Securities Board issued an emergency cease and desist order against several Utah-based individuals and companies allegedly offering unregistered cryptocurrency mining investments that promised implausibly high annual returns of 180% to 250%.
Regulators highlighted how such outlandish promised returns over short timeframes are typical red flags of fraudulent offerings.
The respondents were also accused of intentionally failing to disclose basic informational disclosures and risk warnings to investors about the volatility of cryptocurrencies, technical vulnerabilities, regulatory uncertainties, and market competition risks.
“Combating crypto fraud requires a multipronged approach of aggressive enforcement actions coupled with persistent investor education campaigns,” said Rotunda. “We cannot allow bad actors to exploit emerging technologies to perpetrate old-school schemes.”
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