Jeremy Spence, aka “Coin Signals”, scammed investors to the tune of $5 million. They were not aware that their crypto was being used to fund a Ponzi scheme.
On May 11, a crypto trader who defrauded more than 170 people was sentenced for operating a number of cryptocurrency funds that claimed to be making big returns, but were actually losing money. Instead, he operated a Ponzi scheme.
According to the DOJ, Jeremy Spence, 25, solicited millions of dollars through false representations. “Including that Spence’s cryptocurrency trading was extremely profitable, when in reality, Spence’s trading has been consistently unprofitable.”
Spence, who ran the social media channels of a crypto investment scheme called Coin Signals, was handed the decision by United Stated District judge Lewis Kaplan of the U.S District Court for Southern District of New York. Spence was sentenced to three-years of supervised release, and ordered to repay his victims a total of $2.8 million.
Spence was detained by the Federal Bureau of Investigation in January 2021. Separate civil charges were brought forwardby the Commodity Futures Trading Commission.
Spence pleaded guilty in November 2021 to commodities fraud for soliciting more than $5 million from unwitting cryptocurrency investors. He created various cryptocurrency funds between November 2017 and April 2019, which he claimed were making returns, but were actually making losses.
The DOJ provided an example of Spence posting a message to an internet chat group in which he claimed that one of the funds had made a 148% return during the month.
According to law360 U.S. District judge Lewis Kaplan, who presided over this case:
“The thing that struck me was the stupidity in the people you convinced to invest with you. There are real-life consequences for these shenanigans, and they are serious.”
To make a profit, investors would transfer crypto currency to Spence to invest. However, as his trades were not making any gains, he created fake accounts balances to conceal the losses. Spence began a Ponzi scheme that used funds from investors new to pay investors older. It was estimated that $2 million worth of cryptocurrency was distributed this way.
Spence stated to Judge Kaplan in a statement that he is “mortified” at his behavior. He also apologized to his investors, and claimed that he was not qualified to trade the amount sent to him. Spence added that he “enter[he] a world that [he] wasn’t completely prepared for”.
Cointelegraph asked Spence’s legal representatives for comment, but was not able to get a reply within the given time.