US trader faces 30 years in jail over $5M digital currency fraud

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A man is facing three decades behind bars in the United States if convicted of digital currency-related criminal charges. The suspect is accused of luring at least 170 investors with promises of great returns into his funds, but ended up losing the money and conducting a Ponzi scheme.

As per a Department of Justice press release, Jeremy Spence faces charges of commodities fraud and wire fraud. Better known as Coin Signals, he created and managed a number of cryptocurrency investment pools from November 2017 to April 2019. He then solicited investment through these funds, managing to raise at least $5 million.

His biggest fund was Coin Signals BitMEX fund, which he referred to as “CS Mex Fund,” authorities said. He also created the Coin Signals Alternative Fund and the Coin Signals Long Term Fund.

To lure the investors, he claimed to be quite experienced and extremely profitable. However, as the DoJ notes, he had been consistently unprofitable. In January 2018 for instance, he falsely claimed in an online group that he had generated a return of 148% in the past month. As the DoJ alleges, this was a lie as he had traded in losses for the month.

When investors demanded evidence that their money was generating great returns, Spence generated fictitious account balances. He used these to convince existing investors that he was consistently profitable. In addition, he conducted a Ponzi scheme in which he would use new investment to settle with other investors.

“In total, SPENCE distributed cryptocurrency worth approximately $2 million to investors substantially from funds previously deposited by other investors,” the DoJ stated.

The 24-year-old Rhode Island resident was arrested on January 26. If the Southern District of New York convicts him, he faces ten years in prison for one count of commodities fraud. He also faces 20 years for one count of wire fraud.

Audrey Strauss, the Manhattan U.S. Attorney urged investors to “thoroughly educate themselves before falling prey to cryptocurrency investment scams.” The FBI Assistant Director-in-Charge William Sweeney added:

“Whether investing with cash, shares, or virtual currency, our advice to investors always remains the same—exercise due diligence, and when something just doesn’t seem right, report suspicious activity to the authorities.”

Just this month, the founder of Gemcoin scam was sentenced to 10 years in jail. Steve Chen had made away with $147 million before the law eventually caught up with him.

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