The Eastern and Southern Districts of New York Charge Multiple Cryptocurrency Coin Founders with Securities Fraud, Money Laundering
On March 8th, 2022 the Southern District of New York announced charges of securities fraud and wire fraud against the founder of Ormeus Coin. The charges allege the coin was falsely presented to investors as backed by a $250 million cryptocurrency mining operation with $5 million in monthly revenue, despite neither being true.
On the same day, the Eastern District of New York announced indictments against three owners and operators of ECoinPlus, EmpowerCoin, and Jet-Coin. The indictment includes charges of conspiracy to commit wire fraud and money laundering. Two of the three owner operators were also charged with attempting to destroy evidence and obstruct justice.
Ormeus Coin – Security Fraud
The State of New York alleges that from 2017 through October 2021, the founder produced white papers, presented in in-person roadshows, and released other marketing material that falsely represented Ormeus Coin was secured by a $250 million dollar value cryptocurrency mining operation generating $5 million a month in revenue. The government alleges the actual revenue from any existing mining operation was less than one million per month, any mining operation was worth a small fraction of the amount presented to investors, and Ormeus Coin’s founder and others created and approved false photos of the purported mining facility to present their exaggerated claims.
New York Special Agent Ricky Patel:
“As alleged, Barksdale operated like a traveling salesman and peddled lies, overstatements, and misrepresentations regarding a cryptocurrency called Ormeus Coin, which resulted in duping thousands of investors throughout the world and took in over $70 million. The men and women of HSI will not allow fraudsters to sell dreams of inflated and unrealistic revenues to innocent investors with the goal of lining their own pockets. By leveraging federal and international partnerships, Barksdale is now facing prosecution in the Southern District of New York for his alleged criminal acts.”
The charges allege that approximately $70 million was collected from enrollment packages for Ormeus Coin, from 8,000 investors including investors in New York and the United States.
EmpowerCoin, ECoinPlus, Jet-Coin – Guaranteed Returns
The Eastern District inditement alleges that between April and August 2017, three owners of EmpowerCoin, ECoinPlus, and Jet-Coin offered guaranteed returns for their cryptocurrency coin holders through falsehoods about overseas currency trading operations. Allegedly no such trading operation existed, and the investments generated simply went to pay prior investors or were taken by members of the scheme.
United States Attorney Breon Peace:
“As alleged, the defendants engaged in a sophisticated scheme that preyed on unsuspecting investors nationwide with false promises of guaranteed returns and virtual currency trading opportunities. When the companies collapsed and their criminal conduct was about to be exposed, the defendants attempted to cover their tracks and destroy evidence”.
Despite receiving over $40 million in investment, the coins and company began to collapse. The inditement alleges that from July 2017 to present, the founders began to obstruct an FTC investigation, and then a federal grand jury investigation, into these schemes. The charges include allegations of destruction of evidence, and providing false or misleading information to the FTC and in response to subpoenas.
Cryptocurrency Scams and Fraud
When a person seeks investment funds from others, the claims they make regarding their products and company should be true. When founders or owners mislead or lie to potential investors, from white papers with knowingly unrealistic claims and timelines, to direct fraud through false statements about coins owned or equipment owned, they open themselves to civil and criminal litigation. Statements made by participants on websites, in white-papers, marketing material, in-person, or chat rooms on Discord and other, should be fully transparent and honest about the company, products, and investment.
Schneider Wallace Cottrell Konecky LLP has more than 25 years of experience litigating complex securities fraud to recoup the losses sustained by investors. Highly publicized events are only the tip of the iceberg. Many less sensational cases involve breach of fiduciary duty, material misrepresentation, high-risk trades and excessive trading that harm individual or small groups of investors. Fraud, both within cryptocurrency and in the broader market, remains rampant and even the most diligent investor may be a target.