Jeremy Spence, a 25-year-old Rhode Island crypto trader, also known as “Coin Signals” on social media channels, has been sentenced to 42 months in prison for defrauding 170 people for more than $5.37 million.
According to a Department of Justice (DoJ) press release, Spence operated several crypto investment funds between November 2017 and April 2019, including the Coin Signals Bitmex Fund, the Coin Signals Alternative Fund, and the Coin Signals Alternative Coin Signals Long Term Fund.
Investors who wanted to participate in a fund would transfer cryptocurrency, such as Bitcoin and Ethereum, to Spence who, in turn, made false promises of high returns.
“Spence solicited more than $5 million through false representations, including that Spence’s crypto trading had been extremely profitable when, in fact, Spence’s trading had been consistently unprofitable,” said Judge Lewis Kaplan of the U.S. District Court for the Southern District of New York.
In one such instance, on January 28, 2018, Spence posted a message in an online chat group claiming that his trading skills generated a return of more than 148% in just one month.
Encouraged by these numbers, investors transferred additional funds to Spence.
“In fact, over that same period of approximately one month, Spence’s trading resulted in net losses in the accounts in which he traded investor funds,” added the DoJ.
A ‘Ponzi-like’ scheme
To further deceive investors and keep raising money, Spence forfeited account balances and used fresh funds to cover up losses and make payouts to old investors. “To hide his trading losses, SPENCE used new investor funds to pay back other investors in a Ponzi-like fashion,” said the DoJ.
Spence used cryptocurrency from new investors worth approximately $2 million per a court filing to distribute among old investors.
“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,” Judge Kaplan told Spence, as cited by Law360.
Spence, who pleaded guilty last November, will also have three years of supervised release and will have to pay restitution to the tune of $2,847,743.
Spence’s case is the latest in a series of crypto crimes that have come to light in recent months.
In February, the crypto world was rocked by the news that the DoJ had seized $3.6 billion worth of Bitcoin stolen in the 2016 Bitfinex hack—and rapper Heather “Razzlekhan” Morgan and her husband Ilya Lichtenstein were arrested on charges related to the hack.
According to the FBI, Morgan, and Lichtenstein conspired to launder funds from the hack and spent the proceeds on gold, NFTs, and other items.
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Source: https://decrypt.co/100179/crypto-trader-running-5m-ponzi-like-scheme-faces-nearly-4-years-prison-doj
