Roger Nils-Jonas Karlsson — the Swede behind one of the longest-running crypto Ponzi schemes to date — was finally sentenced to 15 years in prison this month, a lengthy and noteworthy sentence for financial crime in the US.
Karlsson’s story is a sweeping one. It spans a decade, 49 US states, 45 countries, half-a-dozen aliases, and involves everything from the classic Liberty Reserve dollar derivative to Bitcoin.
The websites that Karlsson used to scam unsuspecting victims, mostly elderly, hard of hearing, or otherwise impaired, were online as early as 2009.
Eastern Metal Securities, the piggy bank
Karlsson’s main source of income was Eastern Metal Securities. The company pitched incredible returns tied to the price of gold on minimal funds, and usually took less than $100 at a time from investors.
Still, Karlsson managed to rake in over $16 million between 2011 and his arrest in June 2019 from 3,575 individuals, according to the Department of Justice (DoJ).
Karlsson used that capital to buy a luxury lifestyle in Thailand, where he was arrested in 2019 and later extradited to the US.
The scheme was simple, but stupid: sell investments known as Pre-Funded Reversed Pension Plans (PFRPPs). Heard of them? Of course not, because PFRPPs don’t exist!
Karlsson’s concept boasted that a single $98 investment would eventually result in receiving 1.4 kilograms of gold (worth $45,000 in 2019, the DoJ said), a promise of 46,000% return.
If the gold didn’t come, Karlsson promised to refund 97% of the initial investment.
Eastern Metals Securities collected investments through only three methods: Bitcoin, Perfect Money, and Seychelles-based digital gold processor C-Gold (no longer accessible).
Karlsson’s other website, which disappeared earlier but apparently started the charade, was Human Capital Insurance 25 (HCI25). HCI25 relied on now-defunct crypto processor Liberty Reserve to field contributions.
Liberty Reserve also had its website and assets seized back in 2013 when the Feds shut the company down under the Patriot Act, charging the founders with money laundering and operating an unlicensed financial transaction company.
Karlsson ‘callously robbed’ seniors with crypto Ponzi
Besides a few simple, templated websites, Karlsson gave little actual infrastructure or trading to support his crypto Ponzi’s obscene assertions.
In fact, Karlsson directed any funds sent to Eastern Metal Securities to his personal bank accounts, which he used to buy “expensive homes,” a racehorse, and a Thai resort.
Many victims were left in deep financial stress.
Acting US Attorney Stephanie Hinds commented that Karlsson’s scheme was “frighteningly callous,” targeting “thousands of victims, including financially vulnerable seniors […] to fuel an extravagant lifestyle surrounded by luxury condominiums and lavish international vacations.”
Hinds also noted Karlsson’s crypto Ponzi scheme is one of the “largest to be sentenced to date.”
Karlsson pleaded guilty to securities fraud, wire fraud, and money laundering charges. He also gave up an estimated $16.26 million in recovered assets to pay back victims of his crimes. The US is seeking further restitution.