More On: Bitcoin
Senators and regulators explain why the $60 billion collapse of a major cryptocurrency is not the industry's Bear Stearns moment
Jeremy Spence, nicknamed 'Coin Signals,' defrauded 170 investors out of $5 million by using their cryptocurrency to fuel a Ponzi scheme.
On May 11, a crypto trader was sentenced to 42 months in jail for managing a series of cryptocurrency funds that claimed to offer significant profits but were really losing money and functioned as a Ponzi scam.
The DOJ said that Jeremy Spence, 25, had defrauded investors out of millions of dollars by making false claims, including that "Spence's crypto trading had been tremendously lucrative while, in fact, Spence's trading had been persistently losing."
United States District Judge Lewis Kaplan of the United States District Court for the Southern District of New York handed down the judgement to Spence, who ran the social media channels for a crypto investment fraud dubbed "Coin Signals." Spence was also given a three-year supervised release term and was forced to repay his victims $2.8 million.
The Federal Bureau of Investigation (FBI) detained Spence in January 2021, and the Commodity Futures Trading Commission filed separate civil charges against him (CFTC).
Spence pled guilty to commodities fraud in November 2021 for defrauding over $5 million from unknowing crypto investors by fraudulently claiming that several cryptocurrency funds he created between November 2017 and April 2019 were profitable when they were really losing money.
According to one example offered by the DOJ, Spence claimed in an online chat forum that one of the funds had achieved a 148 percent return that month.
According to Law360, the case was presided over by U.S. District Judge Lewis Kaplan, who said:
"The thing I was struck by was the stupidity of the people you gulled into investing with you, there are real-life consequences to these shenanigans and they are serious."
Investors looking to benefit would send bitcoin to Spence to invest, but because his transactions were losing money, he generated phony account balances to disguise the losses. Spence began conducting a Ponzi scheme in which monies from new investors were used to compensate previous investors, with estimates of roughly $2 million in cryptocurrencies dispersed in this manner.
Spence informed Judge Kaplan in a statement that he is "mortified" by his own actions, apologized to his investors, and claimed he was unqualified to trade the amount he was paid, adding that he "entered a world that [he] was utterly unprepared for."
Spence's legal counsel were contacted for comment, but did not respond within the time frame offered.
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