Business

Steve Kaaru

New Yorker accused of crypto investment fraud arrested

A New York resident faces charges of fraud for a scheme to defraud investors in a crypto advisory business. Patrick McDonnell allegedly made false promises to his clients and fabricated balance statements to hook them into his scheme. He now faces up to 20 years in prison if the court convicts him.

Also known as Jason Flack, McDonnell was arraigned before U.S. Magistrate Judge Sanket J. Bulsara in a Brooklyn court. The U.S. Attorney for the Eastern District of New York Richard Donoghue announced the charges.

According to a press release by the U.S. Justice Department, McDonnell faces nine charges. The first count is allegedly duping investors to pay him for advisory services on cryptos. He used a company he founded known as CabbageTech, special agent-in-charge Phillip Bartlett revealed.

“However, Postal Inspectors and their federal law enforcement partners unmasked McDonnell and his scheme to defraud investors, and brought him to justice for his alleged criminal actions,” he continued.

McDonnell allegedly conducted his fraudulent project between November 2014 and January 2018. He portrayed himself as an expert in crypto trading, promising his customers great advice on trading strategies. He also asked some of his clients to let him do the buying and trading of cryptos for them since he was more experienced.

After some time, he established CabbageTech, a crypto trading and advisory company. Also known as Coin Drop Markets, the company was based in Staten Island, the same neighborhood he hails from.

However, he never provided the advertised advisory services. Moreover, he duped his clients into thinking the business was doing great by sending them false balance statements. Instead, he used the money for his personal needs.

With time, some investors became suspicious and asked for refunds. Initially, he gave excuses for the delays in payment. However, he later stopped responding to these requests altogether. In total, McDonnell allegedly made away with $194,000 in cash, 4.4 Bitcoin Core (BTC), 206 Litecoin (LTC), 620 Ethereum Classic (ETC) and 1.3 million Verge tokens.

U.S. Attorney Donoghue thanked the Commodity Futures Trading Commission (CFTC) for its assistance in the case. He also promised to pursue the case with dedication and to see that McDonnell got the punishment he deserves.

“The defendant’s fraud ends now, he will be held responsible for his criminal conduct,” he said.

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