In the age of the internet, the number of scams has only increased. One such vector for scams opened up roughly a decade ago when Bitcoin and other cryptocurrency became popular.
Cryptocurrency is supposed to be more secure and anonymous than paying with a credit card or bank number online. However, some scammers have used the concept of cryptocurrencies to defraud people, even investors, and turn a quick buck.
Steve Chen, CEO of US Fine Investment Arts, has been sentenced to ten years in federal prison due to a scam he was running through his company. He misrepresented his company, stating that they were mining amber and other gems from mines he claimed to own in the US, Argentina, Mexico and the Dominican Republic. However, these mines didn’t exist.
Early on, Chen sold “points” to investors for values between $1,000 and $30,000 each. These “points,” the CEO claimed, were to be redeemed as shares in the company when it made its initial public offering. Prosecutors claim that Chen never intended for the company to go public, however. In 2014, Chen pivoted away from the “points” and began offering a cryptocurrency called “Gem Coins.”
The CEO insisted that “Gem Coins” were a legitimate cryptocurrency that was backed by the value of the gems mined by the company. Prosecutors have argued that Chen’s activity with the “Gem Coins” and the points he offered to investors constituted a Ponzi scheme. This is because investors were encouraged to reach out to other investors by compensating those who signed others on to the program. Pyramid schemes pop up regularly as scammers find new ways to use the same old tricks to con people.
Prosecutors argue that while Chen’s web of lies to investors was a complex tangle, the end result was predictable. Most of the investors in the scheme were bound to end up losing money. The only person who was likely to come out ahead with any amount of serious money was Chen, who was greatly enriched by the scheme.
Last June, the CEO pleaded guilty to conspiracy to commit wire fraud and tax evasion. In addition to being sentenced to ten years in prison, he has been ordered to pay over $1.8 million to the IRS. Let this be a lesson: ripping people off and evading taxes tends to end with you losing all the money and getting tossed behind bars for your trouble. Instead, consider making normal investments and working a day job.