Justice Department Indicts 6 for Rug Pulls and Crypto Fraud

The Justice Department announced Thursday that it had charged six defendants in four cases related to cryptocurrency fraud— including one that involved a “rug pull,” two that involved lying to investors, and one Ponzi scheme.

“These indictments reflect our deep commitment to prosecuting individuals involved in cryptocurrency fraud and market manipulation,” Assistant Attorney General Kenneth Polite, Jr. said in a statement.

NFT Rug Pull

The department charged Vietnamese national, Le Anh Tuan, 26, with creating a fake website last year for minting “Baller Ape Club” NFTs on the Solana blockchain. After netting $2.6 million in funds, prosecutors said Tuan deleted the website and absconded with investors’ money, a type of fraud known as a “rug pull.”

“Based on blockchain analytics, shortly after the rug pull, Tuan and his co-conspirators laundered investors’ funds through ‘chain-hopping,'” the department said, by moving funds across chains using decentralized exchanges. Tuan faces a maximum sentence of 40 years in prison.

Ponzi

One Florida man, Joshua David Nicholas, 28, and two Brazilian nationals, Emerson Pires, 33, and Flavio Goncalves, were charged with selling investors on their investment platform, EmpiresX, by claiming they had a proprietary trading bot capable of making guaranteed profits. They managed to accumulate $100 million in funds, but the operation may have gone awry. Officials said it ended as “a Ponzi scheme” whereby the defendants paid “earlier investors with money obtained from later EmpiresX investors.”

Nicholas faces a maximum of 25 years in prison, while the Brazilian duo faces 45 years.

Initial Coin Offering

California’s Michael Alan Stollery, 54, was charged with fraud for an initial coin offering that won $21 million from investors through his company, Titanium Blockchain Infrastructure Services, and its token TBIS.

Among other things, the department said Stollery “fabricated purported business relationships with the U.S. Federal Reserve Board and dozens of prominent companies, including Apple Inc., Pfizer Inc., and The Walt Disney Company, to create the appearance of legitimacy,” along with posting false testimonials, including one “from a purported Director of Network Engineering for eBay.”

“In reality, the purported source of the testimonial never held or used the title that was attributed to him, and he denied providing the testimonial that was attributed to him,” DOJ officials said.

Stollery is facing a maximum prison sentence of 20 years.

Impressing Investors With a Pointless Security Team

Las Vegas resident David Saffron, 49, was charged with soliciting investors for his platform, Circle Society, in a manner similar to the defendants who operated the alleged Ponzi scheme, promising them that he was in possession of a trading bot “that could execute over 17,000 transactions per hour” with guaranteed profits of 500-600 percent.

To entice clients into investing, Saffron allegedly led “meetings at luxury homes in the Hollywood Hills and elsewhere, and traveled with a team of armed security guards in order to create the false appearance of wealth and success.” He also told them that he had worked as “the leader developer for the Uber App and Snapchat App,” “Wrote the security software used by most U.S. banks,” and “Developed an AI trading bot that was as advanced as IBM’s AI ‘Watson,’ which was known for defeating reigning champions on the TV gameshow Jeopardy.”

The department said Saffron raised $12 million from his investors. He faces a maximum of 115 years in prison.