Earlier this month, the United States Department of Justice (DOJ) announced charges against six individuals, in four separate cases, involved in fraudulent crypto related schemes and thereby further highlighted its commitment to protecting investors and consumers. The schemes involved the following alleged fraudulent acts;
- NFT Fraud (United States v. Le Ahn Tuan): A Vietnamese national and co-conspirators created an NFT called “Baller Ape” and shortly after the first day of trading, engaged in what is known as a “rug pull” and ended the investment project. Shortly thereafter, the investor funds were then laundered through a “chain-hopping” technique which involved moving funds across different cryptocurrency blockchains to obscure the trail of stolen money.
- Crypto Ponzi Scheme and Unregistered Securities (United States v. Emerson Pires, Flavio Goncalves, and Joshua David Nicholas): Three individuals, two based in Brazil and one in the United States, operated a global cryptocurrency based Ponzi scheme which generated approximately $100 million from investors. The individuals made multiple misrepresentations regarding their trading technology and guaranteeing returns to investors when, in fact, blockchain analytics showed investor funds were laundered through a foreign-based cryptocurrency exchange and early investors were paid off with funds from later investors.
- ICO Fraud (United States v. Michael Alan Stollery): A California resident was charged in relation to fraud in connection with an initial coin offering from a purported cryptocurrency investment platform. This individual falsified white papers, inserted fake testimonials onto his company’s website and misrepresented relationships with multiple prominent companies and the United States Federal Reserve. The ICO raised approximately $21 million.
- Crypto Commodities Fraud (United States v. David Saffron): A Las Vegas resident and owner of a cryptocurrency investment platform solicited investors to participate in an unregistered commodity pool which was promoted as a platform to combine investor contributions and trade on the futures and commodity markets. The individual misrepresented that his trading technology allowed him to execute over 17,000 transactions per hour on various cryptocurrency exchanges and claimed returns between 500% to 600%. He further enticed investors through holding meetings at luxury homes and giving the appearance of wealth and success.
These indictments highlight two important enforcement trends for those involved in the cryptocurrency economy. First, DOJ remains committed to protecting consumers and prosecuting fraudsters who prey on unsuspecting victims via popular technology and buzzwords. Second, DOJ continues to make use of blockchain analytics to map transactions and fund flows across multiple jurisdictions, confirming both its technological capabilities as well as its commitment to work across borders to bring criminals to justice.