Investors were allegedly defrauded out of US$25 million in a cryptoasset Ponzi scheme, according to U.S. authorities.
The alleged operators of crypto investment programs — including the Circle Society, Bitcoin Wealth Management, Omicron Trust, Mind Capital and Cloud9Capital — have been charged with wire fraud, money laundering, conspiracy to commit both wire fraud and money laundering, and conspiracy to obstruct justice.
According to court filings, the schemes falsely promised investors that they would generate large returns from automated trading bots utilizing artificial intelligence.
Instead, authorities alleged that the schemes’ operators — David Gilbert Saffron, 51, of Australia, and Vincent Anthony Mazzotta Jr., 52, of Los Angeles — misappropriated investors’ funds “to pay for personal expenses including private chartered jet flights, luxury hotel accommodations, private mansion rentals, a personal chef, and private security guards.”
It’s also alleged that Saffron and Mazzotta created a fake entity, the Federal Crypto Reserve, which solicited victims to pay it to investigate and recover their losses.
While the new criminal charges have not been proven, Saffron was previously charged in a civil case brought by the U.S. Commodity Futures Trading Commission (CFTC) alleging fraudulent solicitation, misappropriation and registration violations for his role in an alleged crypto fraud scheme.
In 2021, the U.S. district court in Nevada ordered Saffron and Circle Society Corp. to pay US$14.8 million in restitution, US$15.8 million in disgorgement, and a US$1.5-million penalty in response to the CFTC’s enforcement action. It also banned them from U.S. derivatives markets.