DoJ cracks down on crypto fraud in flurry of criminal charges

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On Thursday, the Department of Justice (DoJ) announced it has filed criminal charges against six individuals in four separate crypto fraud schemes that allegedly conned victims out of a combined $135.5 million — including what the DoJ says is the largest NFT scheme to ever be charged.

Three men were accused of running a crypto Ponzi scheme called EmpiresX, which the DoJ says stole $100 million from investors. Another alleged criminal has been charged with securities fraud for raising $21 million in an ICO that claimed to be backed by Apple, Pfizer, Disney, and more — according to authorities, testimonies were forged.

The two other DoJ crypto fraud cases involve a suspected NFT rug pull that lost investors $2.6 million and a $12 million crypto commodities scam that appears to have used lavish Hollywood homes and fake guards to create an illusion of wealth for unsuspecting investors.

The Assistant Attorney General of the Justice Department’s Criminal Division said in the DoJ’s announcement: “The Department of Justice and our partners are dedicated to using every available tool to protect consumers and investors from fraud and manipulation.” 

“These indictments reflect our deep commitment to prosecuting individuals involved in cryptocurrency fraud and market manipulation,” (our emphasis).

The charges put forward by the DoJ altogether include:

  • Five charges of conspiracy to commit wire fraud,
  • Four counts of actual wire fraud, 
  • Two attempts to commit securities fraud, 
  • Three instances of international money laundering,
  • And one count of obstruction of justice. 

The DoJ’s flurry of crackdowns on crypto fraud comes hot on the heels of a report by the agency outlining how to ramp up digital asset crime prosecution through international cooperation.

Earlier this year, President Joe Biden signed an executive order requesting federal agencies to provide strong research and action plans on cryptocurrency.

The DoJ’s requested report was published on Tuesday. “Strong international law enforcement cooperation will be essential to best position the United States and its partners to detect, investigate, prosecute, and otherwise disrupt criminal activity related to digital assets,” it stated. 

Read more: Biden wants US to regulate crypto as matter of national security

DoJ goes after $100 million crypto fraud scheme

The DoJ’s multiple crypto fraud announcement involves charges laid against Emerson Pires, Flavio Goncalves, and Joshua David Nicholas. Both Pires and Gonclaves are founders of EmpiresX, while Nicholas is the cryptocurrency investment platform’s “head trader.” EmpiresX was advertised as a crypto investment platform that used a trading bot capable of guaranteeing returns to budding investors. 

However, things turned sour when investigators discovered the founders appeared to have laundered investor funds using a foreign-based cryptocurrency exchange. It’s also alleged that the trio used EmpiresX as a Ponzi scheme which would take money from fresh investors and use it to pay back earlier investors. The DoJ estimates they stole $100 million from investors.

Each member of EmpiresX is alleged to have conspired to commit wire and securities fraud while Pires and Goncalves were also charged with attempting to commit international money laundering. If found guilty, the latter two may face 45 years while Nicholas could see up to 25 in prison. 

“Baller Ape Club” NFT scheme rug pulled investors

In what’s described as the largest NFT scheme charged by US officials, 26-year-old Le Anh Tuan is accused of rug-pulling users and stealing $2.6 million in the process. Tuan created a “Baller Ape Club” NFT project — essentially a knockoff Bored Ape Yacht Club.

However, once money poured in, Tuan is alleged to have deleted the Baller Ape Club website before stealing all the invested money in a classic rug pull. 

Thanks to blockchain analytics, investigators were able to track Tuan’s loot as he laundered them via “chain-hopping,” the act of converting currency and moving it across multiple blockchains in an attempt to obscure the trail of money. Tuan is charged with alleged wire fraud and money laundering and could face up to 40 years in prison if found guilty. 

Read more: Trio allegedly defrauded $40M with Ponzi-style crypto trading operations

DoJ cracks down on crypto fraud in the Hollywood Hills 

49-year-old David Saffron and his supposed crypto investment platform, Circle Society, were also part of the DoJ’s announcement. According to the DoJ, Saffron used lavish Hollywood homes and fake guards to create an illusion of wealth for investors. Through this veil, he persuaded buyers to invest in commodity pools with promises of a trading AI that could generate up to 600% in gains via crypto exchanges. He allegedly made off with $12 million in investor funds. 

A special agent said: “In reality, Mr. Saffron was operating an illegal Ponzi scheme to defraud victim investors and used the funds for his own personal benefit.”

Saffron is charged with conspiracy to commit wire fraud, four counts of wire fraud, one count of conspiracy to commit commodities fraud, and one count of obstruction of justice. If found guilty, Saffron could face up to 115 years in jail

Dodgy ICO claimed to be backed by conglomerates

Last up is Michael Alan Stollery, a 54-year-old in charge of a cryptocurrency investment platform known as Titanium Blockchain Infrastructure Services (TBIS). Stollery raised $21 million from TBIS’s initial coin offering (ICO) with the help of some questionable partnerships. 

To woo investors, he claimed that the US Federal Reserve Board, Apple, Pfizer, and even Disney were in business with TBIS. Stollery allegedly forged testimonies and his own white paper to prop up the scheme.

The CEO is charged with securities fraud and could face up to 20 years in prison.

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