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Fraudster Sentenced in Largest Known Crypto Ponzi Scheme

Fraudster Sentenced in Largest Known Crypto Ponzi Scheme

The Department of Justice (DOJ) announced the sentencing of one of the largest cryptocurrency Ponzi schemes in U.S. history on Thursday.

Roger Nils-Jonas Karlsson pled guilty to multiple federal charges in March for his role in a multimillion dollar million Ponzi scheme involving Bitcoin and other cryptocurrencies. Karlsson was sentenced Thursday to 15 years in prison for his role in the scheme.

According to court documents from the case, Karlsson reportedly defrauded over 3,500 victims and stole over $16 million since he began the scheme in 2011. Karlsson mainly enticed victims to invest in gold by sending him cryptocurrency through a virtual currency exchange. The company that accepted the cryptocurrency was named Eastern Metal Securities, and the website has been seized by the Department of Justice.

Anonymous Payments

Since it is incredibly difficult to track people using cryptocurrencies like Bitcoin, Karlsson went largely undetected for years. Many fraudsters use Bitcoin and other cryptocurrencies for the anonymity of the transaction, which makes it difficult for victims and authorities to find the true identities of the fraudulent party.

If you are given an opportunity to invest, be skeptical if the opposing party requests Bitcoin or other cryptocurrencies to complete the transaction. It is entirely possible that you will never see that money again if you send Bitcoin to someone you do not know. Watch for warning signs that involve such payment and investment methods.

Unrealistic Returns

Eastern Metal Securities was set up by Karlsson so that victims could invest in the company for less than $100 per share. Karlsson and his company promised investors that each share would yield 1.15 kilograms of gold. Based on a current gold price of $1,800 per ounce, this would equate to over $73,000 per share. Karlsson fully admitted to authorities that he had no way of recompensing investors’ money. Instead, he used the money to fund his lavish personal lifestyle, including luxury homes, cars, vacations, and more.

A common element of fraudulent investment schemes is an unrealistic return on investment that fraudsters promise to investors. If you are promised a return of $73,000 after investing just $100, it is with great certainty that there is potential for fraud. As the saying goes, if it sounds too good to be true, then it probably is.

Targeting Victims

Karlsson reportedly targeted the deaf community in his fraudulent investment scheme. Fraudsters often target specific groups of people that may be more susceptible to fraud than others. For example, we often see a number of investment fraud cases that target the elderly. This tends to be the most commonly targeted group of individuals for fraudulent investments.

Although it is difficult to determine if a potential fraudster is targeting a certain group, be on guard if you suspect that someone is taking advantage of you.

If you are an investor with a suspicion of fraud in any of your investments, please contact us for a confidential, no-cost consultation. Call us today at 239-319-4434 to speak to one of our financial attorneys.