The US Justice Department has charged the principal of Volantis, a cryptocurrency escrow company, for defrauding multiple customers with fraudulent schemes involving over $7 million.
According to the official press release, Jon Barry Thompson, the principal, was accused of taking over $7 million from two victim companies by making false representations in connections with Bitcoin transactions.
He was arrested on Thursday and charged with two counts of wire fraud and two counts of commodities fraud.
“Jon Thompson induced investors to engage in cryptocurrency transactions through his company, Volantis Market Making, by touting a transaction structure that would eliminate any risk of loss during the purchase,” Geoffrey S. Berman, Manhattan US attorney, said.
“As his clients soon realized, however, Thompson’s representations were false, and these cryptocurrency investors ultimately lost all of the money they had entrusted with him because of his lies. Whether a transaction involves cryptocurrency, or any other type of currency, commodity or security, this Office is committed to rooting out fraud and protecting the integrity of our markets.”
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Making false claims to gain clients
The notification also detailed that Thompson claimed his escrow service minimized settlement risk in cryptocurrency transaction as his company also acts as a custodian of assets for both involved parties.
He took $3 million from one of his clients between June and July last year after falsely assuring that the Bitcoins were held by Volantis. However, Thompson failed to deliver any digital asset to the victim and stalled the client for days. He also showed false account statements to the client and sent the money to a third-party entity purportedly in exchange for Bitcoin without first receiving any of the Bitcoin. The victim never received any digital asset or was refunded.
Thompson also received another $4 million from another client and never delivered the Bitcoins or returned the money, making false claims about the whereabouts.
“Thompson allegedly thought no one would ask where their actual money went when they trusted him to invest in Bitcoin. Using phrases and terminology that the victim companies didn’t understand, he allegedly preyed on their ignorance of the emerging cryptocurrency. Our job at the FBI is to investigate fraud and follow the money wherever it leads,” William F. Sweeney Jr., the assistant director-in-charge of FBI, added.
Meanwhile, the prosecutors of the US state of New Jersey recently indited a man for running an illegal Bitcoin exchange. He was charged for operating an unlicensed money transmitting business and could face up to 25 years in prison.