The US Securities and Exchange Commission on 8 March charged siblings John and JonAtina (Tina) Barksdale with defrauding thousands of retail investors out of more than $124m through two unregistered fraudulent offerings of securities involving a digital token called ‘Ormeus Coin.'
According to the SEC's complaint, from June 2017 through the present, the Barksdales offered and sold Ormeus Coin to investors on crypto trading platforms.
In addition, from June 2017 to April 2018, through a multi-level marketing business called Ormeus Global, the Barksdales offered and sold subscription packages that included Ormeus Coin and an investment in a crypto trading program.
As alleged, to promote the offerings, John Barksdale held roadshows around the world while he and his sister, Tina, led the production of social media posts, YouTube videos, press releases, and other promotional materials.
The complaint alleges that at the events, in the produced materials, and currently on Ormeus Coin's website, the defendants falsely claimed that Ormeus Coin was supported by one of the largest crypto mining operations in the world, even though they abandoned their mining operations in 2019 after generating less than $3m in total mining revenue.
As alleged, in many of these investor communications, the defendants falsely stated that Ormeus Coin had a $250m crypto mining operation and was producing $5.4m to $8m per month in mining revenues.
According to the complaint, to preserve the fiction that Ormeus Coin was successfully mining crypto, the Barksdales arranged for a public website to display a wallet of an unrelated third party showing more than $190m in assets as of November 2021, even though the Ormeus wallets were worth less than $500,000.
The complaint also alleges that the Barksdales manipulated Ormeus Coin's price and misused millions of dollars of investor funds for personal expenses.
"We allege that the Barksdales acted as modern-day snake-oil salesmen, using social media, promotional websites, and in-person roadshows to mislead retail investors for their own personal benefit," said Melissa Hodgman, Associate Director in the SEC's Division of Enforcement. "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."
The complaint, filed in the US District Court for the Southern District of New York, charges the Barksdales with violating the federal securities laws and seeks injunctive relief, disgorgement plus interest, and civil penalties.
In a parallel action, the US Attorney's Office for the Southern District of New York unsealed criminal charges against John Barksdale.
The SEC's Office of Investor Education and Advocacy cautions investors to be wary of potential crypto investment scams and of investing based on social media.
The SEC's investigation was conducted by Matthew B. Reisig under the supervision of Timothy England and Melissa Hodgman. Melissa Armstrong and Fred Block will lead the litigation.
