Florida’s Cryptsy exchange founder indicted over allegedly stealing $1M and destroying evidence

Getting your Trinity Audio player ready...

The founder of a digital currency exchange based in Florida is facing life in prison after he was charged by the U.S. Department of Justice in a recent indictment. Paul Vernom faces a 17-count indictment in connection with his alleged crimes, with 16 of the charges carrying a maximum sentence of 20 years behind bars.

Vernom was the founder of Cryptsy, a now-defunct digital currency exchange that operated from Delray Beach in Florida. According to the DoJ, Vernom stole $1 million from his clients’ digital asset accounts, cashed it out, fled the U.S. and went to China, and later accessed servers that contained evidence against him and destroyed them.

Between May 2013 and May 2015, Vernom allegedly used his control over Cryptsy accounts to siphon digital assets from customer wallets. He then cashed them out and transferred the money into his personal bank account, authorities said.

In July 2014, he allegedly told his employees that Cryptsy had been hacked and the attackers had taken off with over $5 million in customer funds. Despite this, the exchange continued its operations with even more customers coming in, according to federal investigators.

In November 2015, Vernom moved to China and shortly thereafter, he confirmed to Cryptsy clients that the platform had been hacked. Months later in 2016, Vernom allegedly hacked into Cryptsy’s servers after learning that the exchange was in receivership, stealing the database that implicated him in the fraud and destroyed all evidence, the DoJ said.

Aside from his digital asset crimes, Vernom is also accused of evading taxes in 2014 and 2015.

In a 2016 interview with the Miami New Times, Vernom insisted that Cryptsy had been hacked. Before it was hacked, he claims to have made $3 million in profits, taking $1.1 million in salary and bonuses.

On why he concealed the hack for years, Vernom claimed that it was because he was seeking to cover the losses from the profits the exchange would make.

“The plan was to use a portion of revenue to replenish the wallets. However, diminishing bitcoin price and volume turned out to not go in our favor,” he told the Miami New Times.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—a from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple, Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.