Former Corrections Officer Faces SEC Action For Crypto Scam

Former Corrections Officer Faces SEC Action For Crypto Scam

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The Securities and Exchange Commission has charged a former corrections officer from New Jersey for his role in a bizarre cryptocurrency scam. 

The SEC has alleged that John A. DeSalvo allegedly solicited ICO money and specifically targeted police officers and first responders. 

A Bizarre Scam 

The charges were announced on the 23rd of August by the United States Securities and Exchange Commission (SEC). According to the announcement, Desalvo was allegedly able to raise an amount of $623,388 from over 220 investors by selling an unregistered token called the Blazar token between November 2021 and May 2022. Blazar told his unsuspecting investors that Blazar would be replacing traditional state pension systems for police, paramedics, and firefighters and give them staggering returns. DeSalvo allegedly told investors, 

“Blazar Token is the first token or coin that is able to be purchased through payroll deduction every week. It will be taken out of one’s weekly earnings pretax similar to payment into a pension, 401k, IRA, or any other retirement savings plans.”

The Securities and Exchange Commission also alleged that DeSalvo falsely claimed that the Blazar token was registered and approved by the SEC despite never being registered with the regulatory body. He also told investors that there was an initial lock-up period for insiders. He then sold 41 billion Blazar tokens, which were worth around $50,000 at the time, when the token debuted on the PancakeSwap decentralized exchange in May 2022. While investors were barred from selling their tokens, DeSalvo was busy selling his. Just weeks after debuting on PancakeSwap, the Blazar token lost 99.9% of its value. The SEC explained, 

“DeSalvo’s massive volume of sales placed downward pressure on the Blazar Token’s trading price and drained PancakeSwap of the majority of its liquidity in the investment, resulting in its collapse and substantial investor losses.”

DeSalvo Abused Position Of Trust 

DeSalvo ended up misusing investor funds, sending all the money to crypto wallets owned by him. He also paid for work on a home. Regulatory authorities added that DeSalvo took advantage of his position as an officer, gaining investors’ trust and promoting his fraud investment. DeSalvo now faces civil charges for violating securities laws, while prosecutors have also filed criminal charges. The chief of the Crypto Assets and Cyber Unit in the SEC’s Division of Enforcement, David Hirsch, stated, 

“Our complaint alleges a brazen affinity fraud that preyed on retail investors’ trust and sense of community. Too often in crypto, we see promoters perpetrate familiar frauds in shiny new wrappers by making claims that are difficult for investors to independently verify. Registering the offer and sale of securities enables critical oversight and improves disclosures to investors.”

Not The First Fraud By DeSalvo 

An official from the Securities and Exchange Commission called the DeSalvo case particularly offensive. This is because his scheme exploited first responders who trusted DeSalvo, thanks to his law enforcement background. DeSalvo had orchestrated another scheme in 2021, where he used social media to recruit investors for a stock and crypto trading venture. DeSalvo was able to trick 17 investors during the scheme, managing to raise $95,000.

DeSalvo then put the funds in a brokerage account but ended up losing $17,000, making several risky trades. He then misappropriated the remaining funds and, to cover his tracks told investors that their assets had become worthless due to prevailing market conditions. 

SEC’s Recent Activities 

The Securities and Exchange Commission, on its part, reiterated that it would continue to pursue crypto scams and those that fail to register securities. Just this week, the SEC charged Titan Global Management with securities violations. The market regulator alleged that the firm misled investors by misrepresenting performance metrics and slapped a $850,000 fine. It has also taken action against Crowe UK LLP, a London-based, pro-crypto audit firm, over its audit of music streaming service Akazoo. Nigel Bostock, CEO of the firm, along with senior auditor Matthew Stallabrassm, were also implicated for their role in the audit. 

However, it isn’t all doom and gloom, as it emerged earlier this month that the SEC was set to greenlight the first exchange-traded fund (ETF) based on ETH futures, marking a big win for crypto. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice

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