Not ‘Above the Law’ – Feds Target ICO Cryptocurrency Scams

Cryptocurrency Fraud, Fraud Management & Cybercrime, Legislation & Litigation

70 million US dollars are said to have been lost to programs like Bitcoiin2gen, which were announced by Steven Seagal

Mathew J. Schwartz (Euroinfosec) •
February 25, 2021

Bitcoiin2gen said in 2018 that “Zen Master Steven Seagal” had become its “brand ambassador”.

If there is anything that is putting the final nail in the coffin of the cryptocurrency’s “initial coin offering”, this is hard to beat: authorities have uncovered a number of charges against a group of suspected fraudsters from Serbia, China, and China in the past few weeks moreover, that global investors have made out of $ 70 million.

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The scammers ‘alleged weapon: Investors’ thirst for cryptocurrency gains, especially during the 2017 and early 2018 ICO bubble.

The craze for new coin offers was so great at the time that even people like Paris Hilton and actor Steven Seagal put them up.

But at least in the case of Seagal recommended Bitcoiin2gen, also known as B2G, as well as a host of other ICOs and alleged trading and mining platforms – Bancde Options, BTC Mining Factor, Dragon Mining, Options Rider, Start Options, and Trinity Mining – it was all a lie or rather a collection of lies with occasional facts, say prosecutors.

Take the supposed thirst for cryptocurrency demonstrated by Seagal, the star of “Above the Law”, “Hard to Kill” and the exaggerated action movie classic “Under Siege”. In early 2018, Bitcoiin2gen published a press release stating that “Zen Master Steven Seagal had become the brand ambassador for Bitcoiin2Gen” – a then new cryptocurrency based on the Ethereum blockchain – which Seagal “wholeheartedly” endorsed. At this point, Bitcoiin2Gen said it had already raised $ 20.4 million.

Shortly thereafter, the US Securities and Exchange Commission opened an investigation that cited dozens of companies and consultants associated with ICOs, and the FBI and Internal Revenue Service’s criminal investigation department also began an investigation .

In 2017, the SEC warned that “coins sold in ICOs can be securities” and are therefore subject to anti-advertising rules. Under these rules, the SEC also reminded that “any celebrity or other person promoting a virtual token or coin that represents security must disclose the type, scope and amount of compensation received in exchange for the promotion.”

Charged by: Kristijan Krstic

Details of what prosecutors describe as a gang of ICO scammers led by a Serbian citizen named Kristijan Krstic, 45, also known as “Felix Logan,” surfaced last year.

According to US authorities, the gang promised an average return of 80%, compensation of 20% for lost trades and the possibility for investors, thanks to their cryptocurrency mining and asset trading platforms “24-7” “Bitcoin at half the market price ” to buy.

Last July, Krstic was one of more than a dozen suspects charged with money laundering and wire fraud by a Dallas-based federal grand jury. If convicted of all charges against them, they face up to 20 years in prison.

Six of the suspects – all Serbian nationals – were subsequently arrested by police in Serbia on the basis of a US arrest warrant.

The gang allegedly used a series of fake names and photos – “most of the women” – to advertise the companies that conduct the trading activities, the Justice Department said.

One of the suspected members of Krstics gang, 32-year-old Antonije Stojilkovic, who was indicted last July, agreed to be extradited to the US earlier this month to face the charges. Serbia and the USA ratified an extradition treaty for the first time in 2019.

Bitcoiin2gen and startup options

A federal indictment, unsealed on Tuesday, also accused Krstic of having committed securities fraud, wire transfer and money laundering linked to two alleged cryptocurrency systems: Bitcoiin2gen, which Krstic founded, and Start Options, which he founded and for which he is CFO acted to solicit investment from individuals from 2017 to 2018, prosecutors say.

Earlier this month, an SEC complaint accused Krstic, promoter John DeMarr and partner Robin Enos of using the two alleged online trading platforms to defraud investors of more than $ 11 million.

“Bitcoiin2gen was a sham, and Krstic and DeMarr allegedly misused millions of dollars in investor funds for their own benefit,” according to the SEC. In addition, the “defendants misleadingly advertised celebrity Steven Seagal as an investor” in the B2G token when they instead paid him – in cash and in Ethereum – to promote their product.

Prosecutors say the gang bagged investors’ funds. “In reality, the money sent by investors in startup options and B2G was never invested as promised and was instead transferred to a Philippines-based financial account and wallet for digital currencies, as well as a US-based fraud scammer.” Justice Department says in a press release.

“As a result, the US-based promoter transferred approximately $ 7 million in investor funds from B2G and Start Options to Krstic, and Krstic stopped responding to all communications and fled with those investors’ funds,” he adds. “A press release from Start Options falsely claimed that the company was sold to Russian venture capitalists.”

Krstic continues to fight Serbia’s request to extradite him for trial in the US

Seagal surrenders profits, pays off well

In February 2020, the SEC announced that it had settled previously undisclosed charges against Seagal for failing to disclose that he had been promised $ 250,000 in cash and $ 750,000 in B2G tokens for his assistance. (Seagal was not named on the federal grand jury indictment.)

“These investors had the right to get information about payments Seagal had received, or they were promised to support that investment so they could decide if it was biased,” said Kristina Littman, head of the Cyber ​​Unit the SEC Enforcement Division. “Celebrities are not allowed to use their social media influence to promote securities without adequately disclosing their compensation.”

Without admitting guilt, Seagal paid the SEC $ 314,000 – consisting of what he earned plus interest and the same amount again in fines. “In addition, Seagal agreed not to promote any digital or other securities for three years,” the SEC said.

When it comes to promoting ICOs, chances are that this will be a sequel to Seagal.

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