Slumping cryptocurrencies have not only had to deal with plummeting values lately, but authorities are uncovering more and more crypto crimes that are adding to the industry's bad name.
U.S. tax authorities have said they were following 50 separate leads into scams involving nonfungible tokens and other aspects of the crypto industry. Tax investigators also said on May 13 that they were pursuing evidence of a $1 billion Ponzi scheme in the crypto market.
Beware of Crypto Fraud and Scams
The FBI additionally on May 12 arrested the CEO of New York crypto trading platform EminiFX on one count of commodities fraud and one count of wire fraud related to an alleged Ponzi scheme that defrauded investors out of about $59 million.
Eddy Alexandre, 50, of Valley Stream, N.Y., according to the New York Business Journal, was arrested on charges which can carry a combined maximum sentence of 30 years in prison. The FBI complaint alleged that Alexandre from September 2021 to May 2022 solicited over $59 million in investments from hundreds of individual investors through the eminifx.com website, guaranteeing they would double their money within five months by earning 5% to 9.99% weekly returns on their investment. The FBI complaint claimed that Alexandre's representations about weekly profits were false and EminiFX had not earned its investors any profit.
Alexandre allegedly marketed EminiFX as an investment platform through which investors would earn passive income through automated investments in cryptocurrency and foreign exchange trading by using a "Robo-Advisor Assisted account," which he described as new technology that was a trade secret, the complaint said.
The complaint said that Alexandre received $59 million from people to invest and misdirected $15 million of the funds to his personal checking account. He allegedly transferred $9.04 million to an electronic trading platform that he had opened in his name in December 2019, which was before he established EminiFX, and sustained about $6.27 million in trading losses. He also transferred $30,000 of investor funds to a digital cryptocurrency wallet account registered in his name, according to the complaint.
Alexandre allegedly used $155,000 to purchase a BMW car, and spent $13,000 on other car payments, including $10,000 for a Mercedes Benz. Another $15,000 was spent on a charitable donation and spent other investor funds on rent, to furnish office space for EminiFX and to hold events on behalf of the company.
A substantial amount of investor funds were also used to pay attorney fees, including checks for $100,000 and $20,000, each with the word "retainer" written in the subject line, the complaint said.
Some Investors Able to Cash Out
While many investors are likely to lose money on their EminiFX investments, the FBI complaint said certain investors successfully withdrew funds from the platform. Bank account activity shows that EminiFX failed to invest the majority of investor funds, and it appears that the only way the platform could fund investor withdrawals was to use funds of existing investors in a classic Ponzi-type scheme.
The FBI investigation discovered that EminiFX accepted investor deposits in U.S. dollars and accepted investor funds and made payments in bitcoin as well, the complaint said.