BOSTON (Reuters) – The founder of a Nevada-based firm was arrested on Wednesday on federal charges he participated in a $6 million scheme to defraud individuals who needed to purchase a virtual currency referred to as My Big Coin that he claimed was backed by gold.
FILE PHOTO: Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard on this illustration image, February 13, 2018. REUTERS/Dado Ruvic/Illustration/File Photo
Randall Crater, the principal operator of My Big Coin Pay Inc, was arrested in Florida after being charged in an indictment filed in federal courtroom in Boston with seven counts of wire fraud and illegal financial transactions.
The indictment got here after the U.S. Commodity Futures Trading Commission final yr sued the corporate, Crater and three different males and accused them of collaborating in a fraudulent virtual currency scheme.
The lawsuit led to one of many first courtroom rulings holding that a virtual currency could possibly be thought-about a commodity inside the jurisdiction of the U.S. derivatives regulator. That civil case stays pending.
Ray Chandler, a lawyer for Crater, stated the 48-year-old was harmless and plans to plead not responsible when he’s ultimately arraigned.
“There are dozens and dozens of documents available that show Mr. Crater made every effort to create a viable virtual currency,” he stated.
The case towards Crater, of East Hampton, New York, is considered one of a number of that U.S. prosecutors and regulators have lately pursued amid considerations about fraud schemes concentrating on cryptocurrency customers.
Prosecutors stated from 2014 to 2017, Crater and others sought to defraud buyers by soliciting investments in My Big Coin, which they falsely claimed was backed by gold and could possibly be traded on a virtual currency change.
In a Jan. 28, 2015, e-mail, Crater advised an investor that “we have 300 million in gold backing us,” the indictment stated.
It alleged that the corporate’s web site additionally falsely claimed its virtual currency was backed by gold bullion, might be transferred to anybody and might be used to buy in any retailer that accepted it.
Rather than use investor funds as promised, Crater misappropriated $6 million for his private makes use of, reminiscent of shopping for paintings, antiques and jewellery, the indictment stated.
In its associated lawsuit, the CFTC alleged the $6 million got here from a minimum of 28 clients. It stated Crater and others solicited them to purchase My Big Coin, whose identify sounded just like the favored virtual currency bitcoin.
The case is U.S. v. Crater, U.S. District Court, District of Massachusetts, No. 19-cr-10063.
Reporting by Nate Raymond in Boston; Editing by Paul Simao and Tom Brown