3 Men Face Cryptocurrency Fraud Charges

Cryptocurrency is a bit like the Wild West when it comes to the law. A few years back, the government was trying to make Bitcoin illegal. Once the courts ruled that Bitcoin was a commodity (and not a currency), it became apparent that Bitcoin was here to stay. Today, you have legitimate companies using crypto technology to produce initial public offerings just like traditional companies. These are known as initial coin offerings and are used to generate revenue for startups.

The problem with initial coin offerings is that they operate in two different ways. Some initial coin offerings are actually securities. If a business offers securities via an ICO, then it’s regulated by the SEC. If not, then you may be able to do anything you want short of fraud. In this case, the perpetrators were charged with wire fraud and securities fraud meaning they sold a stake in a business. According to authorities, they were able to generate $100 million in revenue by defrauding inventors. Two of the trio were also charged with conspiracy to commit money laundering.

The scheme 

The three men convinced investors to invest in their proprietary trading bot which they guaranteed could generate revenue. They were accused of laundering the investment proceeds through a cryptocurrency exchange and then paying out the older investors with the investments of newer investors in a Ponzi-style scheme.

The penalties 

Wire fraud and money laundering both have maximum sentences of 20 years but are often tied to the amount of money stolen. Since the amount of money stolen is in the $100 million range, we can all guess that the sentencing would be on the higher end. Additionally, securities fraud has a maximum penalty of 25 years. Again, the amount of financial loss substantially impacts the sentence. With so much money generated in this fraudulent scheme, it will once again, be on the high end of the sentencing.

Digital currency fraud 

While some digital currency fraud is fairly straightforward, like a company operating a Ponzi scheme with cryptocurrency as opposed to an investment fund, some companies find themselves confused about the rules regarding ICOs. That’s because ICOs, unlike IPOs, have multiple uses. Not all of them qualify as securities. Security tokens, like the ones mentioned in this blog post, are subject to SEC regulations. Utility tokens, which do not promise a stake in the company but some benefit, product, service, or the right to invest later, have fewer regulations attached to them.

Obviously, this scheme was quite convincing judging by the amount of money the men were able to generate. Investors are encouraged to conduct due diligence before investing.

Talk to a Tampa Federal Defense Attorney Today 

The Matassini Law Firm handles the criminal defense of those charged with white-collar crimes. Call our Tampa criminal lawyers today to schedule an appointment and we can begin preparing your defense immediately.

Source:

justice.gov/usao-sdfl/pr/three-men-charged-100-million-cryptocurrency-fraud