Crypto Trader Sentenced To 42 Months For Commodities Fraud

By - May 12, 2022
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A cryptocurrency trader received a 42-month prison sentence this week for defrauding at least 170 victims. He ran several crypto funds that claimed to make large returns, but it was really a Ponzi scheme that lost money.

Jeremy Spence, whose nickname was Coin Signals, had already pled guilty, and US District Judge Lewis A. Kaplan imposed the sentence yesterday. Spence also was sentenced to three years of release (supervised) and must pay back his victims at least $2.8 million.

The Department of Justice stated that the 25-year-old solicited millions of dollars by making false representations. One lie was that his crypto trading was highly profitable. In reality, Spence often lost money in the crypto markets.

Spence Was First Arrested By the FBI In January 2021

Spence was arrested by the FBI at the start of 2021. Civil charges also were brought by the Commodity Futures Trading Commission (CFTC).

Spence gave a guilty plea to commodities fraud at the end of 2021 for soliciting $5 million from investors by making new crypto funds between 2017 and 2019. He claimed they were making impressive returns but they were not.

For example, DOJ said the trader put a message on an online chat group that claimed one fund made a return of 148% that month.

The investors, eager to make a profit, would transfer their crypto to Spence for investing. But his investments didn’t result in gains. So, he created fake balances to obscure his losses. At that time, Spence ran a Ponzi scheme using money from new investors to pay old investors. It’s estimated about $2 million of crypto coins were issued in this way.

Spence told the court he was horrified by his actions and he apologized to his investors. He added that he lacked the qualifications to trade the funds he received.

His attorneys defended their client, saying that Spence did the commodities crimes when he was 21 and he was over his head in the business. They added that the millions of dollars weren’t stolen; it was lost in the volatile cryptocurrency market after it was given to a 21-year-old who never should have been given that level of trading responsibility.

Spence Sentence The Latest In High-Profile Crypto Scams

There have been several other high-profile crypto crimes in the news, too. In February, rapper Heather Morgan and her partner Illya Lichtenstein were accused by the feds of laundering $4.5 billion in stolen bitcoin, which is about 119,000 coins. The pair was arrested in February at their New York City apartment. It’s believed they stole the coins when a hacker broke into the Bitfinex crypto exchange in 2016.

The couple has been free on a $3 million bond pending their trial date. During the scam, it’s alleged by the feds they used several ways to launder money. Court papers state they established accounts with fake names and moved the stolen money in small amounts that were thousands of transactions.

Next, they spread the money in many virtual currency exchanges which sometimes drew suspicion and led their accounts to being shut down.

Morgan and Lichtenstein spent the illegal money on gold, NFTs, Walmart gift cards, a bag of cell phones, and more.

Before they were arrested, the tech-savvy couple looked to be rising financial stars, living in the most luxurious buildings in New York and San Francisco. The rent in their Wall Street apartment building starts at $5000 for a studio.

Lichtenstein – A Talented, Ambitious Entrepreneur

Lichtenstein’s co-workers in Silicon Valley say they are shocked about the money laundering arrests. One friend of the woman said she seemed like a straight shooter and honest. When Morgan wasn’t working on her rapping songs or trying to design clothing, she wrote columns for Forbes and Inc., where she talked about how women can be better negotiators than men.

She said she was able to out-negotiate much older men when she was only 20 years old. The older businessman was loud and had a frat boy persona that the decision-maker didn’t like.

Morgan found that she was so good at marketing at 23 that she launched her entrepreneurship career. She then set up her own companies to help clients create email templates. She also used data science and game theory, while also testing the best practices for copywriting. She claims the companies made millions of dollars.

While Morgan was working on her side businesses and rap career, both of them were making plans to leave the US. Prosecutors say they both flew to Ukraine in 2019 for 30 days to meet with money launderers. During this trip, Lichtenstein created or changed many files in his cloud account that had details about how to do money laundering.

Both Morgan and Lichtenstein probably knew they would be arrested soon in early 2021. They got a notice from the Internet provider that some of their files had been requested by a grand jury. We don’t know if they took it seriously, but by the end of 2021, the federal money-laundering investigation was focused on the pair.

When the feds raided their Wall Street apartment, they found the pair’s getaway prep, including $40,000 in cash in multiple currencies. Morgan also ran for a phone and tried to lock it so the feds couldn’t get into it.

Morgan’s attorney has argued in court that his client was passively involved in the scheme and that Lichtenstein was the instigator.