A former e-currency banker has recently pleaded not guilty to criminal charges in a federal district court. The e-banker has been charged with two criminal charges: one count of wire fraud and one count of securities fraud.
Wire fraud is the crime of defrauding another out of money via the use of wire communications, meaning phone lines or other electronic communications. A person accused of securities fraud has allegedly made an untrue statement about a company which others rely on to make financial decisions. Louisiana residents may be aware that securities fraud and wire fraud are considered to be white collar crime charges.
The e-banker operated the now defunct virtual hedge fund Bitcoin Savings & Trust. According to the allegations against him, he orchestrated a Ponzi scheme in 2011 and 2012 using bitcoins as the currency. Louisiana residents may be aware that bitcoins are a virtual currency that operate without banks or other overriding authority.
A Ponzi scheme functions when a person promises significant financial rewards for the investors. Then, instead of investing the money paid to him or her, he uses money invested from subsequent investors to pay initial investors, passing this money off as dividends from their investments. Allegedly, the e-banker charged in this case promised large payouts to those investors who invested their bitcoins with Bitcoin Savings & Trust, while simultaneously paying earlier investors with funds invested by new investors. The charges against him contend that almost half of the 100 investors lost at least part of their investment.
The e-banker could face up to 40 years in prison if convicted. These allegations are currently not proven and the e-banker has asserted his innocence. Louisiana residents facing similar charges should also consider mounting an aggressive defense to prove their innocence.
Source: coindesk.com, “Bitcoin Ponzi Scheme Operator Pleads Not Guilty to Fraud, Stan Higgins, March 24, 2015