The U.S. Attorney’s Office of the Southern District of New York has indicted the head of a bitcoin escrow company for defrauding investors of $7 million.
According to the press release published by the division of the Department of Justice, head of Volatnis Escrow Platform LLC, Jon Barry Thompson, was charged with two counts each of commodity and wire fraud on Thursday.
Thompson was accused of airbrushing investment risks and false representations of digital assets custody and control, per the release.
Using Crypto to Defraud
Manhattan U.S. Attorney Geoffrey S. Berman stated that Thompson lured investors by painting cryptocurrency as a zero-to-low risk investment. Thompson allegedly duped two unnamed companies of $3 million and $4 million in June and July 2018.
He promised to invest the funds in Bitcoin and sent false profit records to the victim companies. Neither of the companies received any bitcoin, and Thompson did not return the invested funds.
Jon Thompson induced investors to engage in cryptocurrency transactions through his company, Volantis Market Making, by touting a transaction structure that would eliminate any risk of loss during the purchase.
As his clients soon realized, however, Thompson’s representations were false, and these cryptocurrency investors ultimately lost all of the money they had entrusted with him because of his lies,” said Geoffrey.
FBI Assistant Director-in-Charge Sweeney added that Thompson capitalized on the ignorance of both companies on cryptocurrency. “Thompson allegedly thought no one would ask where their actual money went when they trusted him to invest in Bitcoin.
Using phrases and terminology that the victim companies didn’t understand, he allegedly preyed on their ignorance of the emerging cryptocurrency.”
The two commodities fraud charges that were slammed against Thompson each carry a maximum sentence of 10 years in prison, and each count of wire fraud carries a maximum sentence of 20 years in prison. Thus, Thompson now faces a maximum sentence of 40 years in prison.
Cases of crypto-crime like Thompson’s fraud has been rampant of late. With the nascent growth of the cryptocurrency sector, more individuals are willing to go to desperate lengths to get their hands on some coins.
In March, 46-year-old New Yorker, Patrick McDonnell was indicted for swindling about 10 victims of at least $194,000 in cryptocurrency.
His method was similar to Thompson’s– under the flag of a website called CabbageTech, McDonnell promised investors that he would provide trading advice and purchase and trade cryptocurrency on their behalf.
He claimed to help his customers buy bitcoin when he was actually using the pooled funds for personal purposes.
On July 25, 46-year old William Green of Wall Township, Monmouth County, New Jersey was also charged by a grand jury for operating an unlicensed Bitcoin exchange.
Using a website dubbed Destination Bitcoin, Green converted fiat to cryptocurrency for his customers for a small fee. Although his crime is different from Thompson’s, his transmitting activities were not registered according to the prescribed rules guiding cryptocurrency exchanges.
Crypto scams are increasingly littering the face of the crypto sector globally, and are a major drawback for the growth of the sphere. The worrying rate is only making more regulators edgy towards digital assets, and this is causing restrictive crackdowns that are only making it harder for adoption and legalization of the coin.
In a recent finding on Bitcoin.com, $1.36 billion worth of cryptocurrencies was stolen by fraudsters during the first two months of 2018. Of this amount, cryptocurrency fraud accounted for 30 percent. It was followed by hacking attempts (22 percent), theft and exit scams (17 percent each), and phishing (13 percent).
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