The crypto Ponzi scheme offered a guaranteed return of three hundred percent in three weeks, which would compound to a 186,000,000% annualized rate. However, the two fraudsters enjoyed the high life instead of investing the money they received, and now they face decades behind bars.
Australian national David Gilbert Saffron, 51, and Vincent Anthony Mazzotta Jr., 52, of Hollywood Hills, Los Angeles, allegedly conspired to operate a fraudulent scheme to induce victims to invest in various trading programs. Their Ponzi scheme defrauded victims of more than $25 million, the court documents reveal.
The conspirators falsely promised to employ an artificial intelligence automated trading bot, which then would trade victims’ investments in cryptocurrency markets and earn high-yield profits.
The audio recording reveals that Saffron falsely guaranteed actual and prospective participants a return of three hundred percent (300%) on their investment in three weeks. On an annualized, compounded basis, this equals a rate of return on investment in excess of 186 million percent (186,000,000%), the court document reads.
Saffron and Mazzotta promoted fraudulent investment programs under various names, such as Circle Society, Bitcoin Wealth Management, Omicron Trust, Mind Capital, and Cloud9Capital.
The defendants promised actual and prospective participants a “referral fee” equal to twenty percent (20%) of the assets invested by their friends and acquaintances.
They also offered participants various investment plans, varying by guaranteed rates of return, such as “Weekly BTC,” “Year of the Pig,” and “The Power of 3.” The website circlesociety[.]com stated that “The Power of 3” provides “Returns 300% in 45 days!” and “Year of the Pig” earns "Returns 188% in 38 days.”
From September 6th, 2018, through to the present, participants provided at least $11 million in funds via a Bitcoin wallet address controlled by Saffron.
“Rather than investing victims’ funds in cryptocurrency, Saffron and Mazzotta allegedly misappropriated victims’ funds to pay for personal expenses including private chartered jet flights, luxury hotel accommodations, private mansion rentals, a personal chef, and private security guards,” the US Department of Justice announced in a press release.
Investigation revealed that the conspirators allegedly used a double extortion scheme. They created a fictitious entity called the Federal Crypto Reserve (FCR) and then fraudulently solicited previous victims into paying for the FCR to investigate and recover the losses.
“To conceal his identity, Saffron often allegedly solicited victims under various aliases, including David Gilbert and Dave Gabe, and under various online personas, including the Blue Wizard and Bitcoin Yoda,” the press release reads.
The defendants concealed assets, destroyed evidence, and falsified records, obstructing official proceedings. They hid the source and location of victims’ cryptocurrency investments through various means, such as “blockchain hopping” and through services known as “mixers” or “tumblers,” designed to prevent cryptocurrency tracing.
Saffron and Mazzotta face decades in prison. If convicted for each count of conspiracy to commit wire fraud and money laundering, they confront a potential maximum sentence of 20 years in prison. Every wire fraud carries a potential of another 20 years in prison. Each money-laundering count could add up to a ten-year sentence and conspiracy to obstruct justice could result in five years behind bars.
They also face up to a ten-year extension for committing felonies while on pre-trial release, which Saffron allegedly committed.
The Internal Revenue Service is investigating the case, and the Commodity Futures Trading Commission previously charged Saffron by complaint.
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