The cryptocurrency market is a gold rush of innovation, but like any boom, it has its dark alleys of scams and theft.
In fact, according to blockchain analytics firm Chainalysis, the illicit use of crypto hit a record $20.1 billion in 2022. Yet, this figure doesn’t even capture the full scope as it excludes off-chain crimes like fraudulent accounting by crypto firms.
This amount was primarily due to transactions associated with entities sanctioned by the US (such as Blender and Tornado Cash) increasing more than 100,000-fold last year and making up 44% of the year’s illicit activity. But while the volume of stolen crypto funds increased, other illicit crypto transactions, including those related to scams, ransomware, terrorism financing, and human trafficking, fell.
According to Immunefi’s report, cryptocurrency losses due to cyber theft rose to $3.7 billion in 2022, an increase of 58% from what malicious actors stole from investors and exchanges in the year prior to that.
Hence, as the crypto market continues to flourish, so do the crypto crimes, and with that, authorities are ramping up their efforts to bring perpetrators to justice. Today, we’ll look at crypto crimes that resulted in some of the most prominent jail sentences. Let’s start!
One Coin Pyramid Scheme
On Sep. 12, 2023, the co-founder of the massive fraudulent crypto project OneCoin, Sebastian Karl Greenwood, was sentenced to serve 20 years in a US prison and was ordered to pay $300 million by Sept. 20 by federal Judge Edgardo Ramos in US District Court in lower Manhattan.
Greenwood, 46, a citizen of the UK and Sweden, was arrested in Thailand in July 2018 and pleaded guilty to wire fraud and money laundering in December.
Founded in 2014, the Bulgaria-based OneCoin functioned as a global pyramid scheme. The project is stated to be “one of the largest fraud schemes ever perpetrated” for amassing more than $4 billion from at least 3.5 million investors worldwide.
Greenwood started and ran the company with Ruja Ignatova, 43, the so-called “Cryptoqueen” who has not been seen since vanishing in Greece in 2017. She is currently on the FBI’s top 10 Most Wanted list, and the agency has offered up to $250,000 for information leading to her arrest. According to the FBI, she may have changed her appearance through plastic surgery or other methods.
OneCoin was marketed and sold through a multi-level marketing structure, which paid commission to its members who recruited others to buy crypto packages. Greenwood was the top distributor and received 5% of all OneCoin sales, raking in more than $300 million in total.
The project used Bitcoin’s success to “convince investors that OneCoin was the next ‘can’t miss’ investment opportunity,” said the prosecutors with the US Attorney’s Office for the Southern District of New York in a news release. “In reality, unlike legitimate cryptocurrencies, OneCoin had no actual value and was conceived of by Greenwood and Ignatova as a fraud from day one.”
The co-founders and others repeatedly lied to their investors, claiming that the token’s value was determined by market forces when, in reality, its price was set “arbitrarily,” authorities said.
Turkish Crypto Exchange Thodex
Faruk Fatih Özer, the founder and chief executive of the collapsed Turkish crypto trading platform Thodex, along with his brother Güven Özer and his sister Serap Özer, have been sentenced to over 11,196 years in prison. On top of that, a judicial fine of 135 million liras (about $5 million) was also imposed by the Anatolian 9th Heavy Penal Court.
“I am smart enough to lead any institution on Earth,” Özer told the court. “That is evident in this company I established at the age of 22. I wouldn’t have acted so amateurishly if this were a criminal organization.”
Thodex was one of Turkey’s largest crypto exchanges before it suddenly went offline in April 2021, leaving over 400,000 members in the dark and without access to deposits of $2 billion in cryptocurrencies.
Özer fled to Albania, but after Interpol issued a red notice against him, he was arrested in August 2022. He was then extradited to Turkey in April 2023 and detained by police upon arrival on seven charges, including establishing and managing an organization with the purpose of committing a crime, being a member of the organization, frauding company executives or merchants, and cooperative managers, fraud by using information systems as a tool of banks or credit institutions and laundering the resulting value of assets.
Besides Özer, his brother, sister, and four other senior employees were jailed. Additionally, at least 83 other people were detained as part of the investigation. The eventual trial resulted in 21 defendants facing a prison sentence of up to 40,564 years.
In Sep. 2023, the court acquitted 16 of the 21 defendants and released four of the seven jailed due to a lack of evidence, while other defendants were given varying degrees of imprisonment for various crimes.
The collapse of Thodex has been particularly shocking in Turkey, which is grappling with the devaluation of the fiat currency, Turkish lira, and subsequent inflation that has raised the popularity of crypto’s usage as a hedge against these economic issues.
Online Darknet Marketplace Silk Road
In May 2015, Ross Ulbricht was sentenced to life in prison without the possibility of parole for the operation of the now-defunct online dark market Silk Road. In addition to the prison term, US District Judge Katherine Forrest in New York also ordered Ulbricht to pay nearly $200 million, calculated based on Silk Road’s total illegal sales using the exchange rate when the transaction was made.
According to 2020 court documents, the Justice Department seized 69,370 BTC from a hacker who moved his stash to a private wallet in April 2013, which wiped out Ulbricht’s debt to court. The DOJ made a deal with Ulbricht in February 2021 to forfeit any claim he may have had to the stolen BTC in exchange for the restitution to be repaid once the crypto asset is sold.
Ulbricht, who ran the marketplace under the name Dread Pirate Roberts, was convicted on seven charges related to narcotics distribution, computer hacking, and conspiracy.
His family has set up a social media account @RealRossU, which relays messages he dictates from prison. The account has helped get 565,542 signatures for a petition on Change.org asking for clemency for Ulbricht.
“I was arrested at the age of 29, and today I turn 39. I’ve lost my 30s to prison. During that time, I’ve done my best to learn from my mistakes, better myself, and help others do the same. I hope someday I can make amends as a free man as well,” reads Ulbricht’s tweet on X (formerly Twitter) from March this year.
Founded in 2011, Silk Road is the online marketplace that hosted everything and was eventually shut down by the FBI in 2013. The platform is often cited as the first true “use case” of Bitcoin as it proved that fully decentralized digital money could be used without being censored.
PonxiCrypto Exchange Mt. Gox Hack
The US federal government charged two Russian nationals, viz. Aleksandr Verner and Alexey Bilyuchenko in connection with a series of hacks that brought down the Bitcoin exchange Mt. Gox in 2014.
In June 2023, the Department of Justice unsealed a 2019 indictment charging both Verner and Bilyuchenko with conspiring to launder 647,000 BTC stolen from the exchange. According to the government, the stolen funds from Mt. Gox were passed through the now-defunct crypto exchange BTC-e. Verner and Bilyuchenko used US companies to liquidate the stolen BTC. Transactions were made between BTC-e and two other companies: Roger Ver’s bitcoin-friendly computer hardware vendor, Memory Dealers, and BitInstant. BitInstant was founded by Charlie Shrem, who was sentenced to two years in prison in 2014 for money laundering charges.
Verner was arrested in Greece in 2017 and extradited to France in 2020, where he received a five-year prison sentence and a €100,000 fine in a money laundering case. He was then extradited to the US in August 2022 and, if convicted, may face a 55-year prison sentence in the US.
According to Vinnik’s lawyer, Arkady Bukh, the BTC-e co-creator who is accused of laundering at least $4 billion might plead guilty if US prosecutors present solid evidence against him.
Mt. Gox owner and CEO Mark Karpeles was arrested in 2015 and indicted in Japan on charges including embezzlement and aggravated breach of trust, only to be acquitted on most of them four years later.
Mt. Gox was a Tokyo-based crypto exchange that was once responsible for more than 70% of Bitcoin transactions. Its hack resulted in the theft of 850,000 Bitcoin, with only a fraction of them recovered. Now, close to a decade later, the creditors are still not compensated, though the repayment may soon become a reality.
Ponzi Scheme Bitconnect
Founded in 2016, Bitconnect was closed in Jan. 2018 after getting cease-and-desist letters from state regulators in Texas and North Carolina. In Feb. 2022, a US grand jury indicted BitConnect founder Satish Kumbhani for orchestrating a global Ponzi scheme that raised $2.4 billion from investors in a fraudulent crypto investment platform.
Kumbhani was charged with misleading investors about BitConnect’s purported proprietary technology, which falsely promised returns based on phony “volatility software” that tracked crypto exchange markets and used money from new investors to pay earlier ones. He was also charged with wire fraud, operating an unlicensed money-transmitting business, conspiracy to commit wire fraud, commodity price manipulation, and international money laundering. If convicted, Kumbhani could get 70 years in prison.
The US Securities and Exchange Commission (SEC), which sued Kumbhani in Sep. 2021, said last year that he “has likely relocated from India to an unknown address in a foreign country.”
In Sept. 2022, Glenn Arcaro, the top North American promoter of the BitConnect cryptocurrency investment platform, was sentenced to 38 months in prison for running the Ponzi scheme that defrauded at least 4,150 people from 95 countries. He also agreed to forfeit $24 million, all of which will be used to “repaid to investors in restitution or forfeited to the government.”
According to the DOJ, Arcaro transmitted the proceeds earned from the Bitconnect scheme to offshore accounts, transformed some of the proceeds into precious metals storage, and obtained foreign passports with the goal to avoid paying federal and state income taxes on his Bitconnect income and to shield his assets from collection by the Internal Revenue Service (IRS). Arcaro was sentenced in federal court in San Diego, where he pleaded guilty in Sep. 2021. He admitted to fraudulently marketing BitConnect’s proprietary coin offering and crypto exchange as a lucrative investment.
In Jan. 2023, the United States District Court for the Southern District of California ordered that the victims of BitConnect will receive a share in a $17 million restitution. As per this, around 800 victims of the scheme from 40 countries will be able to receive a small slice of restitution.
Crypto Exchange FTX Collapse
In Nov. 2022, FTX crashed due to mismanagement of customer funds, lack of liquidity, and the large volume of withdrawals. The exchange lacked appropriate management, governance, and organizational structure, as well as any accounting and financial controls. But what initially seemed to be just an accounting oversight turned out to be major fraud, with its customers losing billions of dollars.
Founded in 2019, the company was worth $32 billion by January 2022. Its founder, Sam Bankman-Fried (SBF), was arrested in Dec. 2022. He was indicted by the US District Court on eight counts of criminal charges, including wire fraud, securities fraud, money laundering, and campaign finance violations. SBF has pleaded not guilty, and his trial is scheduled to begin on Oct. 3. If convicted, SBF could face 115 years to 155 years in prison.
Meanwhile, Ryan Salame, a top FTX executive who played a key role in the exchange’s political fundraising operations, could forfeit over $1.5 billion after pleading guilty to federal criminal charges tied to the platform. Salame is the latest executive in SBF’s circle of close advisers to admit to criminal conduct, with Nishad Singh, Caroline Ellison, and Gary Wang having already pleaded guilty to fraud charges and agreed to cooperate against SBF.
This case is ongoing and yet to reach its conclusion, which, given the time it took for others to finally come to their result, it will be years before the main perpetrators in the FTX debacle will be brought to justice.
So, there you have it, these were some of the biggest crimes in the crypto industry and the subsequent jail sentences over the last decade.
Click here to learn about the 5 worst rug pulls in crypto.
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