Founder of a $147M Crypto Ponzi Scheme Sentenced to ten years in Jail

Founder of a $147M Crypto Ponzi Scheme Sentenced to ten years in Jail

Central District Court in California sentenced GemCoin founder Steve Chen to 10 years in federal prison. Chen has been announced guilty of being the mastermind and leader of a $147 million crypto Ponzi scheme that involved mining and digital currency fraud, and tax evasion.

Over 70,000 Investors Defrauded with Gemstone-backed Crypto

According to the US Department of Justice, 63-year-old Californian Steve Chen and a team of conspirators have masterminded the fraudulent endeavor that remained active for two years – from July 2013 to September 2015. It was among the earliest recorded crypto Ponzi schemes. 

Chen was the owner and CEO of Fine Investment Arts, Inc. (USFIA), presented to his clients as a multi-level marketing company that extracted amber and other gemstones from non-existing mines it owned in the US, the Dominican Republic, Argentina, and Mexico.

Following, Chen received about $147 million from 72,000 victims by promising that their gemstone holdings back GemCoin tokens, thus marking one of the largest Ponzi schemes ever to face district court.

The fraudulent scheme used well-known marketing bait, encouraging investors to recruit others. In return, they would get compensation, including cash, travel costs, luxury cars, estates in the Los Angeles region, and EB-5 visas for immigrant investors.

“Because the primary focus was on recruiting other investors, rather than selling USFIA products to retail customers, the vast majority of investors were destined to lose money – while making [Chen] very wealthy,” reads the official statement.

Lured investors have reportedly entered the scheme with initial payments between $1,000 and $30,000 each.

Crime and Cryptocurrency Keep Getting Along?

The court’s statement reads that Chen has agreed to pay a $1,885,094 restitution to the IRS on the tax evasion count. A district judge has scheduled a restitution hearing for USFIA victim investors on July 16.

The latest Ponzi scheme is far from being the only one since bad actors consider cryptocurrencies an easy way to dupe their victims internationally, disguising their strategies as investment opportunities. 

Recently, US authorities extradited from Panama the co-founder of a major crypto Ponzi scheme AirBit Club, Gutemberg Dos Santos. He and his partners allegedly plucked their victims with about $20 million. Operators of the crypto fraud ran false advertisements, promising users significant rewards from Bitcoin trading and mining.

However, while cryptocurrencies and crime are still getting along, recent data from CipherTrace reads that mainstream crypto thefts, hacker attacks, and frauds have decreased by 60% on account of Defi crimes, which have risen significantly compared to 2019.

As CryptoPotato reported recently, multinational cybersecurity and anti-virus provider Kaspersky warned that crypto and BTC-related crimes might get even more attention from bad actors because of the high price of BTC and other digital assets.

Title: Founder of a $147M Crypto Ponzi Scheme Sentenced to 10 Years in Prison
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Published Date: Tue, 12 Jan 2021 13:04:01 +0000