The Texas State Securities Board took decisive action on May 28 against a fraudulent cryptocurrency cloud mining operation, Arkbit Capital, by issuing a cease and desist order. The order revealed that Arkbit had been engaging in deceptive practices to perpetrate an alleged investment fraud, promising daily returns to investors on crypto deposits. The group operated under various entities, including Arkbit Capital, Arkbit Capital Holdings, ABC Holdings LLC, and ABC Mining. They also used fake media assets, such as a video of their CEO speaking at a conference, to lure investors into their scheme.
Arkbit’s payment processing was facilitated through CoinPayments.Net, a processor with a policy that banned users from the United States. However, the account holder was traced to an individual in India, rather than Arkansas, as claimed by Arkbit. This fraudulent activity is part of a wider trend of alleged crypto Ponzi schemes that regulators have been working to shut down. The Texas State Securities Board and other state regulators have been prioritizing investor protection by proactively combating crypto investment frauds and protecting residents from unscrupulous actors.
In March 2024, the U.S. Securities and Exchange Commission (SEC) uncovered a $300 million crypto Ponzi scheme known as CryptoFX that targeted investors in the Latino community. Subsequently, the promoters behind the collapsed IcomTech were convicted of conspiracy to commit wire fraud by a New York jury. Additionally, a former legal executive of the OneCoin fraud scheme was sentenced to four years in prison for her role in laundering $4 billion in crypto fraud in 2019. These cases highlight the ongoing efforts by regulators to address fraudulent activities in the crypto space.
The Texas State Securities Board’s enforcement division, led by Financial Examiner Alexis Cantrell, played a crucial role in uncovering Arkbit’s fraudulent activities and taking action to protect investors. The board issued an emergency cease and desist order in 2018 against individuals and companies offering unregistered cryptocurrency mining investments that promised unrealistically high returns. Regulators have emphasized the importance of educating investors about the risks associated with cryptocurrencies and taking swift action against fraudulent schemes.
The cease and desist order against Arkbit Capital serves as a warning to other potential bad actors in the crypto space that regulators are actively monitoring and taking action against fraudulent activities. By targeting entities like Arkbit, regulators are sending a message that deceptive practices will not be tolerated, and investors will be protected from investment schemes that offer unrealistic returns. With ongoing efforts to combat crypto fraud through enforcement actions and investor education campaigns, regulators are working to safeguard the integrity of the crypto market and protect investors from falling victim to fraudulent schemes.
