Crypto Platform Founders Indicted for Ponzi Scheme

The DOJ announced that a District of Oregon grand jury charged four founders of a decentralized finance cryptocurrency investment platform with wire fraud for having allegedly perpetuated a crypto-related Ponzi and pyramid scheme that raised approximately $340 million from investors.

As set forth in the indictment, the defendants operated a crypto platform that offered investments in partial ownership of smart contracts. Investors would transfer crypto assets from their personal digital wallets into one of the platform's smart contracts in exchange for a "slot" in the contract. The indictment alleges that the defendants programmed the smart contracts to divert investments from new investors to earlier investors to "repay" the earlier investors.

The indictment also alleges that the defendants structured the platform as a pyramid scheme whereby investors could purchase more slots for higher purported earning potential, and existing investors were sent additional funds for recruiting new investors. The defendants allegedly siphoned funds from the platform into accounts they controlled, despite advertising that "100 percent of the [platform] income goes directly and transparently to the members of the project with zero risk." The indictment cites several instances in which defendants publicly denied allegations of fraud.

Each of the four defendants is charged with one count of conspiracy to commit wire fraud, which carries a maximum penalty of 20 years in prison.