Department of Justice Arraigns Serbian National For $7M Crypto Fraud

US regulators are cracking down on crypto-related crimes. The 2019 crime surge in the nascent industry has made global regulators renew efforts to suppress a fast-growing societal menace. The latest example of government intervention is that of defunct Start Options.

Two Crypto Fraudulent Schemes

On Tuesday, a 45-year-old Serbian national Kristijan Krstic was arraigned for defrauding US investors of $7 million through two online investment platforms he floated.

In a statement released by the Department of Justice (DoJ), the accused was found guilty of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud, and one count of conspiracy to commit money laundering. 

According to the complainant, Krstic was the brain behind two digital-assets investment platforms, “Start Options” and “B2G.” He served as the Chief Financial Officer (CFO) of Start Options.

Krstic working under the alias “Felix Logan,” intentionally deceived US investors to purchase securities in the form of investment contracts in Start Options and B2G. He also created a Twitter handle to authenticate his alias “@felixlogan_cfo” and used the platform to communicate with the misled investors.

Start Options was touted as a cryptocurrency mining and trading service. Its founder made misleading statements to convince investors to invest. He told them the platform was the largest Bitcoin exchange in euro volume and liquidity and praised by the international media.

B2G, on the other hand, was said to be an “ecosystem” that facilitates the exchange of B2G tokens, as well as digital and fiat currencies in a secure and intuitive trading environment.

Prospective investors were told that their dollar investments in B2G tokens could be converted to Bitcoin or other altcoins. B2G tokens could also be exchanged for other fiat currencies like Euros and Pounds sterling. 

Instead, investments were laundered to an international Philippines-domiciled account and later re-routed to a US promoter. The unnamed US contact then transferred a reported $7 million to Krstic. Soon after, the accused stopped all communications with victims, citing a need to take on new challenges.

Regulators Crack Down On Crypto Crimes

Just as interests are rising in cryptos due to the bull’s run, there seems to be an increase in crypto-related crimes. In 2019 alone, criminals carted away with over $21 billion of investor funds.

Although in 2020 criminal activities ameliorated somewhat due to crypto exchanges identifying lots of illicit transactions and flagging them, it is still a billion-dollar industry.

Global regulators have also taken the fight to the crooks. In a September 2020 crypto-related crime hearing, Rossen Iossifov – founder of RG Coins crypto exchange platform, was found guilty of conspiracy to commit racketeering and money laundering.

Iossifov allegedly used his platform to defraud over 900 American citizens of $7 million. The ill-gotten funds were thereafter transferred to criminal organizations through crypto payments. 

The prosecuting counsel said Iossifov’s crypto platform allowed $5 million of dirty money to be laundered through it. The Bulgarian-based exchange also flouted the Know Your Customer (KYC) protocol. Iossifov himself is said to have pocketed $184,000 from the illicit transactions.  

He was subsequently sentenced to 10 years in prison by a US court after two weeks of trial, where he needs to complete 85% of his 121- month sentence before being eligible for parole.

24-year old Stefan He Qin is another such case. He pleaded guilty to securities fraud in a Manhattan court on Feb.4. According to the Justice Department, Stefan made away with $90 million of investor funds over a four-year period. Stefan faces a possible 20 years behind bars.