A New York man has been arrested and charged with fraud after he allegedly orchestrated a $1.8 million block reward mining scam. Prosecutors said the suspect solicited funds from several victims, promising to deliver mining rigs and offer miner-hosting services, but ended up channeling the funds to personal use.
U.S. Attorney for the Southern District of New York Damian Williams announced the arrest of Chester “Chet” Stojanovich on charges of defrauding investors through fraudulent misrepresentations.
Charges unveiled by the Department of Justice (DoJ) said that since 2019, Stojanovich and companies he controlled, such as Chet Mining Canada and Phoenix Data LLC, stated to be selling miners and miner-hosting services to investors, raising close to $2 million. However, Stojanovich “deceived his victims, misappropriated his victims’ money, and provided them with almost no Miners, Miner-hosting services, or hash power.”
According to the FBI, Stojanovich only purchased 72 S9 miners from Amazon and two others from eBay. He used these as props to deceive his clients, taking photos of them which he would then send to the clients and claim to be new miners. He had taken payment for at least 1,500 S9 miners and another 1,500 L3 miners.
According to the complaint, one client grew suspicious and followed up on the supposed purchases. He demanded that Stojanovich send him proof of the purchase, including the serial numbers of the miners. Stojanovich didn’t have any proof, and the client insisted he must see the miners. Stojanovich allegedly decided to take the client all the way to Goose Bay, a 31-hour drive from New York.
The two started their journey on Memorial Day 2019, but by the time they got to the Canadian border, they did not see eye to eye, and Stojanovich reportedly dumped the client at the border.
“…the trip ended abruptly, in Buffalo, New York, where Stojanovich abandoned [the customer] at the airport and stated in substance and part that he would not pay any refund,” the complaint claims.
After using fabricated evidence such as fake photos of the miners for several months, Stojanovich finally stopped responding to his clients. He would turn up months later, claiming that the operator of the Goose Bay facility had declared bankruptcy and taken off with all the mining equipment.
“A great deal of excitement and ‘buzz’ has been generated in recent years about the ‘new world’ of cryptocurrency mining. But new financial frontiers can also generate fresh opportunities for old-fashioned fraud. Here, Chet Stojanovich is charged with using those time-worn fraud techniques on a new frontier,” U.S. Attorney Williams commented.
This isn’t the first time that the New Yorker has been charged for the scam. In June 2020, six of his victims filed a lawsuit against him, accusing him of fraud, breach of contract, civil RICO violations, and unjust enrichment, among others.
He was ordered to turn up in New York for a deposition connected to the lawsuit. He lied under oath about the whereabouts of his cell phone, claiming it was in his car and that it contained most of the details about his enterprise. He was allowed to go and retrieve his phone but spent hours away until everyone had left the courtroom. After this, he took off to Canada, where he resided for several months until his return this week, when he was arrested after crossing from Canada into the U.S. at Champlain, New York.
The 37-year-old Manhattan resident, who has spent the last several months in Canada, is charged with one count of wire fraud and stands to spend a maximum of 20 years in prison if convicted.
Watch: CoinGeek New York presentation, FYI: Better Information Tools for a More Lawful Blockchain Industry
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.