In May 2024, Rashawn Russell, a former investment banker from Brooklyn, was sentenced to 41 months in prison and was ordered to pay $1.5 million in restitution after pleading guilty to operating a crypto fraud scheme in which he promised investors guaranteed returns from cryptocurrency trading. In a separate fraud scheme, Russell obtained at least 140 credit, debit, and identification cards in the names of third parties and used stolen credit card information to open online gambling accounts and make fraudulent purchases.
According to the Department of Justice, Russell worked for Deutsche Bank from July 2018 to November 2021. He began his career as an analyst and was promoted to associate two years later. From November 2020 to August 2022, Russell engaged in a Ponzi-like crypto fraud scheme to induce people to invest with him. He told friends, college classmates, and former Deutsche Bank colleagues that he could generate 25% returns in three-months and that he had doubled some investor’s money in earlier three month periods. He told victims he would use their funds for cryptocurrency investments that would earn large and sometimes guaranteed returns. He misappropriated victim assets and used them for personal gain, to gamble, and to repay other investors, repeatedly failed to repay the victims’ principal investments, and failed to provide them with the promised rates of return.
Crypto fraud refers to illegal or deceptive activities that involve cryptocurrencies or blockchain technologies. These schemes may prey on users’ lack of familiarity with cryptocurrency markets and are designed to defraud investors, traders, or other users in the crypto space, often by exploiting the lack of regulation, anonymity, or technical complexity of the system.
The federal government treats cryptocurrencies as securities, and illegal transactions that use cryptocurrency are subject to investigation and prosecution for federal securities fraud. In the case of a Ponzi-like crypto fraud scheme like the one perpetrated by Russell, a broker promises high returns while using new investors’ funds to pay off earlier investors. The scheme collapses when there are not enough new investors to support payouts to earlier investors.
Criminal charges for crypto fraud often overlap with other criminal charges, such as allegations of money laundering, securities fraud, wire fraud, tax fraud, or theft.
The penalties for a federal crypto fraud conviction can be severe and vary depending on the nature and scale of the fraud, the amount of money involved, and the specific laws violated. The federal government uses different statutory frameworks to prosecute people for crypto fraud.
Wire fraud occurs when a person uses telecommunications or information technology to commit a crime. Because cryptocurrencies exist online, any crime involving the use of a cryptocurrency can result in federal wire fraud charges.
The penalties for a single conviction for wire fraud can include up to 20 years in prison, fines of up to $250,000 for individuals and $500,000 for organizations, and restitution payments to the victims.
Securities fraud refers to deceptive practices in stock or commodities markets that lead investors to make decisions based on false or misleading information. Penalties for a single count of securities fraud include up to 25 years in prison and fines of $5 million for individuals and $25 million for entities, plus restitution.
Money laundering is the process of concealing the origins of illegally obtained money, typically by passing it through a complex sequence of banking transfers or commercial transactions. Penalties for money laundering include up to 20 years in prison and fines of up to $500,000 or twice the value of the property involved in the transaction, whichever is greater.
If you are under investigation or have been charged with federal crypto fraud, having an experienced federal criminal defense attorney on your side is crucial.
Hope Lefeber is a federal white-collar criminal defense attorney who serves people in Philadelphia and New York City. She is regularly called upon to represent high-profile defendants in high-stakes criminal fraud cases. She began her career as an Enforcement Attorney with the Securities and Exchange Commission (SEC), where she learned how the government prepares and prosecutes cases in federal court. Today, she uses that experience to defend people accused of bond fraud and other financial crimes.
To learn more about Ms. Lefeber and how she can help, contact us today to schedule a confidential consultation to discuss your situation.
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