SEC Charges Man For Running Alleged Crypto Mining Scam

The Securities Exchange Commission has charged a man for running an alleged crypto-mining scam.

What Happened

The SEC has filed a complaint against Donald G. Blakstad, who raised around $3.5 million between July 2015 and May 2019 from at least 14 investors through allegedly fraudulent securities offers.

Blakstad raised the money from investors through three of his companies: Midcontinental Petroleum, Inc., a purported oil, gas, and alternative energy resources firm; a company called Xact Holdings, formed mainly to acquire a Canadian manufacturer of industrial vehicle components; and  a “purported” cryptocurrency mining operations firm called Energy Sources International Corporation (ESI).

How It Happened

The mining company, ESI, launched in 2015 in Nevada with Blakstad as its President and one employee, had raised about $550,000 from at least five investors between December 2017 and May 2018.

Blakstad, at the time, allegedly sent an email to potential investors telling them that ESI had “developed a world-class data center for cryptocurrency mining” that would allow its investors to “purchase the mining equipment and lease back to ESI or to make an equity investment in the company,” according to the SEC filing.

What's Next 

Blakstad, however, used nearly 50% of the fund for personal expenditures, "including spending funds on personal entertainment, the purchase of a stake in a nightclub, the purchase of a luxury automobile, and to fund illicit securities trading," alleges the SEC.

The SEC is seeking to permanently restrain Blakstad from "any issuer that has a class of securities," civil fine, and return of the funds as a penalty.