The founder of Gemcoin cryptocurrency company has reached a plea agreement to counts of fraud and tax evasion. According to the U.S Department of Justice, Steve Chen defrauded tens of thousands of investors of over $147 million in the two years that Gemcoin was in operation. He faces ten years in prison and three years of supervised release for his crimes.
Chen, who also went by Li Chen and Boss, was the founder of the U.S Fine Investment Arts Inc. (USFIA). He misled the investors to believe that USFIA was a successful multinational that dealt in gemstone mining and processing. USFIA purportedly owned mines in Argentina, the Dominican Republic, the U.S and Mexico. Chen further lied that USFIA was a subsidiary of a larger company known as AFG which had over $50 billion in assets.
Over 70,000 victims invested in the scam between July 2013 and September 2015, the DoJ alleges. These investors received points in return, which they could then redeem for Gemcoins. The tokens were backed by actual physical gems for which they could be traded, he told them. He also misled them to think that he would use his experience to take USFIA to an IPO which would make the investors huge profits. According to documents filed by the DoJ, USFIA sold investment packages that ranged from $1,000 to $30,000.
As part of his plea, the 62-year-old Chen admitted to having under-reported his income in 2014. He allegedly claimed to have made $138,000 that year while in reality, he made $4.8 million. He put most of this money into buying homes in Arcadia and Irvine in California, funding his gambling habit and enrolling his child in a prestigious school. He also defrauded the government of $1.8 million.
Nick Hanna, a U.S Attorney, reminded investors to beware of promises of instant success as this is how fraudsters lure them in. He added, “Mr. Chen’s promises to investors were as worthless as his non-existent mines and phony digital currency. This case should remind all investors that trappings of success may convey legitimacy, but everyone should exercise extreme care when considering giving hard-earned money to any outfit promoting trendy products and extravagant profits.”
This year, a number of crypto fraudsters have been brought to book already. Late last month, European authorities arrested 10 people in a $6.6 million Israeli crypto scam. The scammers defrauded over 85 investors, targeting their victims by phone.
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