The fast-changing nature of cryptocurrency can make it an exciting investment opportunity when values are going up and a disaster when values are going down. It can also make the cryptocurrency market rife with accusations of fraud.
Alleged cryptocurrency fraud scheme
Recently, the U.S. Securities and Exchange Commission charged the Texas company Geosyn and its two co-founders with fraud in what prosecutors say was a multimillion-dollar scam.
According to the SEC, Geosyn offered a service of bitcoin mining. In this practice, computers work on complex math problems as a way of “mining” value for the currency. Geosyn allegedly raised more than $5.5 million from several dozen investors who hoped to increase their bitcoin holdings through mining, but the company did not actually perform all the tasks it promised.
The indictment claims that Geosyn covered up its failures by distributing about $354,000 in bitcoin to its investors, but in fact it had only raised about $320,000 of this through mining. One of the co-founders allegedly purchased bitcoin himself to distribute to investors in an effort to conceal what was really going on. Meanwhile, investigators say, the co-founders kept more than $1 million of their investors money for themselves, spending it on vacations and luxury goods.
New technology, old laws
The SEC and other federal agencies have said that they have witnessed multiple schemes such as the one alleged in the Geosyn case.
While the technology involved in these cases is new, the schemes often run afoul of long-existing laws against securities fraud and wire fraud. Fraud accusations can give rise to civil lawsuits as well as criminal charges, and in some cases defendants can face both.
Conviction on criminal charges can mean prison time as well as restitution. This means a person convicted of committing fraud can be forced to return all the funds they collected through fraud.
Everyone accused of a crime deserves a defense, and when the accusations involve new technology and complex operations, it’s important for defendants to have help from professionals who are knowledgeable about analyzing and presenting complex evidence.
