The Texas State Securities Board has officially issued a cease and desist order to Arkbit Capital, citing engagement in fraudulent cryptocurrency cloud mining operations.
The directive, led by Financial Examiner Alexis Cantrell, asserts that Arkbit Capital, along with its associated entities, has participated in deceptive tactics. These include the deployment of altered images and videos designed to attract investors to their dubious investment schemes.
Fraudulent Activities and Deceptive Practices Arkbit
Arkbit Capital, along with Arkbit Capital Holdings, ABC Holdings LLC, and ABC Mining, falsely asserted they operated data centers in Arkansas for cloud mining various cryptocurrencies. They enticed investors by promising daily returns of 1.6-2.8% over 120 days for digital asset deposits ranging from $50 to $49,999. To bolster their credibility, Arkbit registered as a business entity with the Arkansas Secretary of State, giving the false impression of legitimacy.
Texas Securities Commissioner Travis J. Iles emphasized the importance of skepticism among investors when approached with lucrative investment opportunities, noting the increasing sophistication of fraudsters.
The order also revealed that Arkbit Capital used CoinPayments.Net, a payment processor, to handle transactions for their investment plans, despite the platform’s policy restricting users from jurisdictions such as the United States. The account holder for Arkbit’s CoinPayments account, Paras Khivesara, was found to be based in Hyderabad, India, not Arkansas.
One particularly deceptive tactic involved a manipulated video purportedly showing Arkbit’s CEO and founder speaking at a cryptocurrency conference in Austin, Texas. The Texas State Securities Board found no evidence that Delmar Estabrook or Arkbit Capital attended the conference.
Joe Rotunda, Director of the Enforcement Division at the Texas State Securities Board, urged the public to remain vigilant and thoroughly research any investment opportunities encountered on social media before parting with their money.
Broader Trend of Crypto-Related Ponzi Schemes
This case is part of a broader trend of Ponzi schemes linked to cryptocurrency in the United States. On March 15, the U.S. Securities and Exchange Commission (SEC) charged 17 individuals with orchestrating a $300 million Ponzi scheme through the crypto trading platform CryptoFX.
Registered in Houston in February 2020, CryptoFX had its operations halted by the SEC in September 2022 on suspicion of being a Ponzi scheme. Eighteen months later, the SEC identified and charged the individuals allegedly involved in the scheme.
On March 18, a New York jury convicted two former promoters of IcomTech, a purported crypto mining and trading company, of wire fraud conspiracy. David Brend and Gustavo Rodriguez were found guilty of one count each of conspiracy to commit wire fraud by a jury in a New York District Court, ending a two-week trial.
The fraudulent scheme saw funds being diverted to purchase real estate, fund travel, and host lavish expos and community presentations, where promoters showcased luxury cars and attire to lure more investors with promises of financial freedom.
Most recently, on April 4, Irina Dilkinska, the former head of legal and compliance for the multibillion-dollar OneCoin fraud scheme, was sentenced to four years in prison after admitting her role in laundering millions of dollars. United States District Judge Edgardo Ramos handed down her sentence on April 3, which also included one month of supervised release and a forfeiture order of $111 million as restitution.
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