David Gilbert Saffron from Australia and Vincent Anthony Mazzotta Jr. from California face serious charges for allegedly masterminding a $25 million cryptocurrency Ponzi scheme. The indictment, having been unsealed by the US Department of Justice (DoJ) this week, reveals a complex web of deceit involving promises of high-yield returns through artificial intelligence-driven (AI) trading bots.
Australian and Californian Men Indicted in $25M Cryptocurrency Fraud Scheme
Saffron and Mazzotta are accused of luring investors into various trading programs with names like Circle Society and Bitcoin Wealth Management. They claimed these programs would leverage AI for trading in cryptocurrency markets. However, the funds were not invested as promised. Instead, they were allegedly used for extravagant personal expenses, including private jets, luxury hotels, and private security.
The duo's deceit didn't stop at false promises of AI trading. They created a fictitious entity, the Federal Crypto Reserve, to exploit their victims further. Under various aliases and online personas, Saffron solicited additional payments from victims, purportedly to recover their losses.
"To conceal his identity, Saffron often allegedly solicited victims under various aliases, including David Gilbert and Dave Gabe, and under various online personas, including the Blue Wizard and Bitcoin Yoda," the DoJ stated in the official press release.
Two Men Charged for Operating $25M Cryptocurrency Ponzi Schemehttps://t.co/lxx3k01c4v pic.twitter.com/lIaU7Imfge
— Criminal Division (@DOJCrimDiv) December 12, 2023
They are also charged with conspiring to obstruct justice and launder money. Further, they allegedly used blockchain hopping and mixers to hide the trail of the misappropriated cryptocurrency.
Each count of wire fraud and money laundering could land Saffron and Mazzotta up to 20 years in prison. The charges include conspiracy to obstruct justice and felonies committed by Saffron while on pre-trial release.
It's important to remember that an indictment is not proof of guilt. As the legal process unfolds, Saffron and Mazzotta remain innocent until proven otherwise.
Saffron: A Recidivist in Ponzi Schemes
Saffron's history of fraudulent activities dates back to at least 2021. A federal court in Nevada had previously issued a default judgment against him for orchestrating a cryptocurrency fraud and misappropriation scheme. He and his associates attracted investors to a commodity pool, promising returns as high as 300%.
The court records indicate that this scheme commenced in 2017, deceitfully gathering at least $15.8 million from around 179 individuals. Contrary to their promises, the funds were not employed for trading purposes. Saffron redirected these funds to his personal cryptocurrency wallet and used new investments to pay earlier participants, exhibiting classic traits of a Ponzi scheme.
A Ponzi scheme, named after the early twentieth-century scammer Charles Ponzi, is an investment fraud that promises high returns but pays these returns from new investors' capital, not legitimate profits. This fraudulent practice has become increasingly prevalent in the less regulated and decentralized cryptocurrency markets, particularly in the United States.
The Rising Problem of Crypto Ponzi Schemes in the USA
Recent reports have highlighted the growing concern around Ponzi schemes. For instance, in late October, Finance Magnates reported that the United States District Court for the Southern District of New York was progressing with sentencing individuals involved in the infamous AirBit Club cryptocurrency Ponzi scheme. The founders and promoters misappropriated approximately $100 million of investor funds through this scheme.
Moreover, in 2022, the Commodity Futures Trading Commission (CFTC) identified and acted against another fraudulent digital asset investment operation. The CFTC filed an enforcement action against two individuals and their companies for fraudulently soliciting at least $44 million from investors.
This article was written by Damian Chmiel at www.financemagnates.com.
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