A California man was charged in an unsealed complaint today for his alleged involvement in a coordinated cryptocurrency and securities fraud scheme that used digital currency platforms and foreign financial accounts.
John DeMarr, 55, of Santa Ana, was charged in a complaint filed in the East District of New York with a charge of conspiracy to commit securities fraud. DeMarr made his first appearance this afternoon before Judge John D. Early of the Central District of California. Judge Early referred the case to the Eastern District of New York for further proceedings.
“The prosecution alleges an elaborate scheme in which the defendant conspired to attract unsuspecting investors with fraudulent promises of big returns in the cryptocurrency market, just to divert millions of dollars for his own personal use,” said the acting assistant attorney general. Nicholas L. McQuaid of the Criminal Division of the Department of Justice. “Although technologies and methods are constantly changing, the Criminal Division’s commitment to aggressively pursue fraud in all its forms remains unchanged.”
“As alleged, DeMarr made misrepresentations and false promises that persuaded investors to dump millions of dollars into cryptocurrency scams, all to facilitate their extravagant lifestyle,” said acting attorney general Seth D. DuCharme of the Eastern District of New York. “We will continue to eradicate and prosecute those who would deceive investors into filling their own pockets.”
“Sir. DeMarr created an elaborate cryptocurrency scheme, complete with high-profile endorsements and incredibly large returns that proved to be a mirage that cost investors millions,” said responsible assistant director Kristi K. Johnson of the FBI’s Los Angeles office. Angeles. “Sir. DeMarr is now in custody and no longer spends his victims’ money, nor does he hide from justice by pretending his own disappearance. ”
“In today’s high-tech financial world, there are more and more opportunities for fraudsters to take advantage of people and their bank accounts,” said special agent responsible Ryan Korner, of the IRS-Criminal Investigation (IRS-CI) field office. ) In Los Angeles. “John DeMarr’s Bitcoin operation is an example of a cryptocurrency investment scheme that has not compensated its investors. Claiming to be part of a cryptocurrency ‘ecosystem’, DeMarr created nothing more than an elaborate fraud scheme in which he stole money from his investors to finance his own personal lifestyle, resulting in losses of more than $ 11 million. Financial crimes never pay off, because in one way or another the person behind the computer will be caught and held accountable. “
As claimed in the complaint, between 2017 and 2018, DeMarr conspired with others to defraud several victims by $ 11.4 million, inducing them to invest in his companies, “Start options” and “B2G”, based on material representations false and misleading. Start Options was intended to be an online investment platform that provided cryptocurrency mining, trading and digital asset trading services. B2G was supposed to be an “ecosystem” that would allow users to trade B2G tokens, provide digital wallet stakeout and trade digital and fiat currencies “on a secure and comprehensive platform”.
According to the allegations, however, both Start Options and B2G were fraudulent. In approximately December 2017, DeMarr and others began offering securities in the form of investment contracts to US and international investors through the Start Options website. Investments were accepted in Bitcoin, U.S. dollars or euros. To participate, investors had to deposit their funds for a specified contract period, after which they could supposedly withdraw their money at a significant profit.
Among other things, DeMarr and others falsely claimed that investors’ funds would be invested in mining and trading platforms for digital assets that would yield huge profits. In reality, however, the money was never invested and instead diverted to accounts controlled by DeMarr and others and used in various personal expeditions, including buying a Porsche, jewelry and renovations to DeMarr’s California home.
Likewise, according to the complaint, Start Options also intended to present celebrity endorsements to promote its title offerings. For example, a professional athlete allegedly endorsed the starting options when, as claimed in the indictment, the athlete had no involvement with the starting options and his name and image were used without his consent. Based on this and other fraudulent promotional materials, investors sent millions of dollars in Bitcoin, Ethereum and fiat money to financial accounts, including cryptowallets, controlled by DeMarr and others in the United States and abroad.
As claimed, in late January 2018 or close to it, instead of allowing initial option investors to withdraw money from their accounts after the required period of time, DeMarr and others demanded that investors roll over their accounts in an “offer” unregistered currency initial, or ICO, of B2G, the second of the two fraudulent companies in which DeMarr was involved. Among other fraudulent representations, DeMarr and others falsely told investors that ICO would raise capital for the company to build an “ecosystem” that would allow users to trade B2G tokens, provide digital stake wallets and trade. In fact, investors have never actually received digital tokens and the offer funds have not been used to develop the B2G platform.
According to the complaint, DeMarr and others also paid several promoters, including an actor famous for martial arts films made in the 1980s and 1990s, to serve as a celebrity promoter and spokesperson, falsely claiming that B2G could generate a return of “8000%” to investors within one year, and that he was a participant in the ICO. DeMarr and others also created fake B2G press releases and white papers, manufactured B2G account statements and refused to allow investors to withdraw their money.
As alleged in the complaint, DeMarr staged his own disappearance to avoid facing dissatisfied B2G investors. DeMarr instructed others to release statements claiming that DeMarr had been beaten and disappeared in Montenegro, and telling B2G investors to stop trying to contact DeMarr or his family regarding the impossibility of returning the money invested in B2G. In fact, however, DeMarr did not disappear in Montenegro and was instead believed to reside in California.
The charge in the complaint is based on allegations, and the defendant is presumed innocent, unless and until proven guilty.
This case was investigated by the FBI and the IRS-CI. Prosecutor Kevin Lowell of the Criminal Division’s Fraud Section and Deputy District Attorneys Kaitlin Farrell, Hiral Mehta and David Pitluck of the Eastern District of New York are suing the case, with assistance in confiscation issues from Assistant Attorney Laura Mantell .
The Criminal Division’s Fraud Section plays a central role in the Justice Department’s fight against white collar crime across the country.