Missouri Secretary of State Jason Kander has ordered a local bitcoin mining hardware company to halt operations, citing a number of concerns.
The mining company, Virtual Mining Corporation (VMC), is headed by CEO Kenneth E. Slaughter and has been involved in the bitcoin space since 2009.
VMC’s parent company, AMC, is currently developing 28nm ASIC mining chips of its own, and it is this side of the business that has caused Kander to act.
Kander claims that Slaughter used ‘deceptive tactics’ to raise money for the development of bitcoin mining rigs, with the Secretary of State’s office pointing out that Slaughter used Bitcoin Talk forums to solicit potential investors for his products. The funds raised in the online effort would be channelled into AMC and VMC, both controlled by Slaughter.
“In exchange for purchasing stock in Virtual Mining Corporation, investors could see a two-year return on their investment as high 2,812%, Slaughter stated on Bitcoin Talk. The offering brought in more than $200,000 in Bitcoins,” Kander’s office stated in a press release. “Peddling shares of Active Mining Corporation, Slaughter also told potential investors that his company had offices in London and that investors would receive ‘100% return’ from the ‘global profits’ of his technology sales.”
Slaughter took no steps to inform investors of the potential risks involved in the venture and told investors that bitcoin was “highly regulated” at both the state and federal level, the office says. Slaughter also allegedly failed to inform investors of relevant complaints against his previous company, Active Internet Communications.
Slaughter and his companies now face the prospect of multiple penalties from Kander’s office, the press release states.
This is not the first time Secretary Kander felt compelled to act on bitcoin-related issues. Back in April, his office issued an investor alert for Missouri residents.
In the release, Kander said the safest approach to digital currency is to be cautious and to recognise that not even supposed digital currency experts know enough about the product to help investors make an informed decision.
“Investments that are sold as a way to make a quick profit can also lead to a quick loss,” Kander said. “I encourage Missourians to be wary of any investments that promise an unusually quick return.”
Kander warned that many people were drawn to bitcoin as a way to make a speedy profit, but due to volatility and security issues, some investors have lost substantial amounts of money on digital currency markets.
Kander has called on all Missourians to contact his office before investing in a business, to check the status of the person and the product involved in the potential investment, warning:
“If somebody isn’t registered, that’s a major red flag.”