On May 19, 2023, the United States Department of Justice charged a Las Vegas man, Bryan Lee (“Lee”), for his alleged role in the CoinDeal fraud scheme, which involved more than 10,000 victims and $45 million. Lee has been charged with multiple counts of conspiracy, mail fraud, wire fraud and engaging in monetary transactions in criminally derived property. Lee is the third person to be charged by the DOJ in the scheme, after Neil Chandran and Michael Glaspie.
The indictment alleges as follows: The fraudulent scheme operated by enticing individuals to invest in a group of companies doing business under the banner of “ViRSE” and controlled by Chandran. The alleged fraudsters claimed that the companies were developing virtual world technologies, including their own cryptocurrency, for use in the metaverse. Further, the alleged fraudsters claimed that once the technology was fully developed, two well-known billionaires had promised to purchase the ViRSE companies, which would result in significant profit to the investors. In reality, however, no such technology was being developed and the two well-known billionaires had made no such commitment. Instead, the alleged fraudsters used investor money on lavish personal expenses, including luxury cars and real estate.
This case is noteworthy for a few reasons:
- The case highlights the likelihood of additional government oversight in blockchain and metaverse spheres. The alleged fraudsters were able to attract many innocent victims using popular buzzword concepts like the metaverse and cryptocurrency. However, they offered little in the way of proof of their developing technology other than verbal assurances of its impending success and profit. This demonstrates that there is still a significant lure associated with these concepts among the general public, but perhaps little in the way of knowledge. Considering the number of fraud cases arising in this area in the past years and the number of victims of this particular scheme, it is likely government regulators will continue their stepped-up their regulation in the blockchain and metaverse spheres.
- The US regulators will work together to prosecute criminals exploiting virtual currencies and metaverse concepts. The FBI Washington Field Office, with assistance from the FBI Las Vegas and Omaha field offices, investigated this particular case and the Criminal Division’s Money Laundering and Asset Recovery Section is currently responsible for the forfeiture of the ill-gained assets. In addition, the SEC also sued Chandran, Glaspie and other individuals and companies for their role in the alleged fraud. This signals that the US government will dedicate significant resources across multiple areas to investigate, charge and prosecute criminals operating in the blockchain and metaverse spheres.
The indictment can be read here.