The Texas State Securities Board (TSSB) has taken decisive action by issuing a cease and desist order to Arkbit Capital for its involvement in fraudulent cryptocurrency cloud mining activities. This enforcement highlights the ongoing vigilance of regulatory bodies against deceptive investment schemes in the crypto sector.
Overview of the Fraudulent Activities
Arkbit Capital, along with its affiliates Arkbit Capital Holdings, ABC Holdings LLC, and ABC Mining, collectively known as “Arkbit,” have been implicated in promoting fraudulent crypto cloud mining operations. They falsely claimed to have data centers based in Arkansas dedicated to mining various cryptocurrencies.
Under the leadership of Financial Examiner Alexis Cantrell, the TSSB found that Arkbit employed manipulative image and video techniques to falsely promote their investment plans. These tactics were designed to mislead investors about the legitimacy and operational scale of their mining activities.
Specific Allegations and Findings
Arkbit was found offering investment opportunities with promised daily returns ranging from 1.6% to 2.8% over 120 days for deposits between $50 and $49,999. However, these promises were baseless, as the supposed operations did not exist.
The investigation revealed that Arkbit used CoinPayments.Net to process transactions for their fraudulent schemes, despite restrictions that prevent users from certain jurisdictions, including the U.S., from using the service. The account holder for Arkbit’s CoinPayments was identified as Paras Khivesara from Hyderabad, India, contradicting claims of an Arkansas-based operation.
A critical piece of evidence was a manipulated video that purportedly showed Arkbit’s CEO, Delmar Estabrook, speaking at a cryptocurrency conference in Austin, Texas. The TSSB confirmed that neither Estabrook nor any representatives of Arkbit Capital were present at the conference, exposing the video as fraudulent.
Joe Rotunda, Director of the Enforcement Division at TSSB, has emphasized the need for public vigilance, especially concerning investment opportunities that are promoted on social media. He urges potential investors to conduct thorough research before committing funds to avoid falling victim to such schemes.
Contextualizing with Other Cryptocurrency Frauds
This action against Arkbit is part of a broader trend of regulatory crackdowns on cryptocurrency-related frauds:
- CryptoFX Ponzi Scheme: On March 15, the SEC exposed a $300 million Ponzi scheme operating under the guise of CryptoFX, which specifically targeted crypto investors from the Latino community in the U.S.
- IcomTech Convictions: A New York jury convicted two promoters of IcomTech on March 18 for their roles in a collapsed fake crypto mining and trading scheme.
- OneCoin Legal Actions: On April 4, Irina Dilkinska, the former head of legal and compliance for the notorious OneCoin scheme, was sentenced to four years in jail after admitting her involvement in laundering millions of dollars.
| Date | Scheme | Impact | Outcome |
|---|---|---|---|
| Mar 15 | CryptoFX | $300M Ponzi scheme | SEC investigation |
| Mar 18 | IcomTech | Fake mining/trading scheme | Promoters convicted |
| Apr 4 | OneCoin | Multibillion-dollar fraud | Legal head jailed |
The cease and desist order against Arkbit Capital underscores the ongoing challenges and risks associated with the cryptocurrency investment landscape. It serves as a stark reminder of the importance of regulatory compliance and the need for investors to remain cautious and informed.
Featured image credit: Andres Ramos via Vecteezy