This is not the first time Honig has faced questions over his actions. In 2000, he was alleged to have committed stock manipulation. Honig was fined $25,000 and suspended for 10 days, according to the Financial Industry Regulatory Authority. In 2003, he let his broker’s license lapse.
“The answer’s no,” Honig said when asked if he still manipulates stocks.
SEC filings suggest that when Honig began his charge to take over the board, he was represented by lawyer Harvey Kesner of Sichenzia Ross Ference Kesner LLP. A few months later, Kesner’s law firm appears on Riot Blockchain’s SEC filings.
Kesner’s company, Paradox Capital Partners LLC, owns Riot stock, according to SEC filings.
When reached by phone, Kesner said he didn’t know anything about Riot Blockchain and Barry Honig and hung up.
Honig said Kesner was Riot’s attorney, but “his law firm has represented me in other issues in the past.”
Since its name change, Riot has been a very active company, issuing 23 press releases about acquisitions and new divisions.
One of those acquisitions was Kairos Global Technology Inc., which had been founded less than two weeks before the purchase. Kairos’ main asset was $2 million of mining equipment. Riot purchased Kairos for $11.9 million worth of preferred convertible stock, according to SEC filings.
O’Rourke told CNBC the company paid a premium for the equipment due to a shortage of mining equipment and difficulties getting it directly from the manufacturer.
Kairos appears to have many links to Riot. The company was incorporated by Joe Laxague of Laxague Law Inc., the same lawyer who, SEC filings suggest, represented another major investor in Riot who has owned more than 7.49 percent of the company.
Laxague told CNBC he could not comment when reached by phone and hung up.
Kairos’ president was Michael Ho, Nevada records show, a poker player who played at a tournament with two other professional poker players, both of whom are on Riot’s advisory board, according to records reviewed by CNBC.
O’Rourke said Riot is using the equipment to mine and that the company is currently mining in Norway and Canada. Despite the many press releases, there has been no formal mining announcement.
“We have launched our own Bitcoin mining operation and it will be a focal point for Riot’s expansion plans moving forward,” is all Riot says on its webpage dedicated to mining. SEC filings are silent on mining activity.
As for professional poker players advising Riot? O’Rourke told CNBC the players are investors in the cryptocurrency space with more than 50,000 social media followers. He called them “thought leaders.”
Riot is not O’Rourke and Honig’s first cryptocurrency investment.
In 2013, they were owners in BTX Trader, a cryptocurrency company, which was acquired by WPCS, a publicly traded company in which Honig had invested, according to court records.
WPCS bought BTX on Dec. 17, 2013, just 13 days after it was incorporated in Delaware, according to SEC filings.
At the time, WPCS was a communications, infrastructure and contracting company. The stock went up to $435.60 on a split-adjusted basis. It’s now trading around $2 after selling off BTX Trader in 2015, according to SEC filings.
Just last month, the company changed its name to DropCar after a merger and is now a cloud-services-for-cars company.
O’Rourke, through his lawyer, told CNBC in an email that he made several investments with Honig as co-investor. “BTX Trader was one of our first investments together in the blockchain sector in 2013,” he said. “I have a good relationship with Mr. Honig, and he has been a supportive shareholder of Riot.”
Honig acknowledges the investment.
The questions continue for Riot Blockchain.
On Tuesday, Riot filed to withdraw prior SEC filings.
“It is not the result of any government inquiry,” O’Rourke said in an email. “It was just corporate clean up from our securities counsel.”