Secretary of state puts the brakes on Springfield bitcoin operation

Missouri Secretary of State Jason Kander yesterday halted a Springfield bitcoin operation for an alleged investment scheme.

Kander's office issued a cease-and-desist order to Springfield resident Kenneth Slaughter and two companies he controlled, according to a news release.

Slaughter, president and CEO of Virtual Mining Corp. and Active Mining Corp., is charged with allegedly using deceptive tactics to convince online investors to pay for the development of bitcoin mining equipment. Mining, in this case, refers to the complex solving of math problems to produce additional bitcoins, an unregulated digital currency.

Using an online forum known as Bitcoin Talk, Slaughter solicited potential investors for his plans to develop, manufacture and sell bitcoin mining equipment through his companies. Slaughter claimed investors could see a two-year return as high as 2,812 percent for purchasing stock of Virtual Mining Corp., and through this process, he gained more than $200,000 worth of bitcoins, according to the release.

For the purchase of Active Mining Corp. shares, Slaughter also told investors his company operated offices in London and that they would receive 100 percent from the global profits of his technology sales, according to Kander's office.

Kander alleges Slaughter did not inform investors how potentially risky the bitcoin industry can be and claimed to investors that bitcoin was highly regulated at the state and federal levels. Kander's office noted bitcoins are not issued by banks or the government, and federal regulators have not made a concrete decision on how to handle the digital currency.

“The fact that somebody is selling investments through bitcoin rather than traditional currency doesn’t change their obligations to investors, and I encourage Missourians to call my office before making any bitcoin investments,” Kander said in the release. “Investors have a right to know the full set of facts about both an investment and its backer, including the risks, profit-generating strategy and pertinent financial history.”

The secretary of state's securities division may issue enforcement orders, administrative actions or court orders to prohibit violations of investor laws, according to its website.

Slaughter and his companies could face multiple penalties from Kander's office, according to the release. Secretary of state spokesman Kevin Flannery said Slaughter has 30 days to request a hearing on the cease-and-desist order. An administrative judge is slated to rule on the order after that period, he said.