The founder of the Start Options and Bitcoiin2Gen (B2G) digital asset investment platforms has been indicted on charges of investor fraud and money laundering.
The US Department of Justice (DoJ) said on Tuesday that Kristijan Krstic, a Serbian national, has been charged in an indictment for allegedly participating in international, cryptocurrency-related fraud.
According to the complaint, the 45-year-old founded two platforms, Start Options and B2G, and also served as the Chief Financial Officer (CFO) of Start Options.
It has been alleged that between roughly 2017 and 2018, Krstic and co-conspirators targeted investors in the United States, luring them to purchase securities in the form of investment contracts in both companies, marketed as successful trading services.
Prosecutors say that Start Options claimed to be a digital asset trading service that was "the largest Bitcoin (BTC) exchange in euro volume and liquidity," apparently "consistently rated the best and most secure Bitcoin exchange by independent news media."
B2G touted itself as an "ecosystem" for trading tokens, digital, and fiat currencies, and also offered a form of wallet for storing and managing cryptocurrencies.
Both companies, however, are allegedly scams, according to the indictment.
"The money sent by investors in Start Options and B2G allegedly was never invested and instead was laundered internationally to a Phillippines-based financial account and digital currency wallet, and diverted to a US-based promoter of the fraud," the DoJ claims.
In addition, in 2018, the DoJ says that Start Options investors trying to redeem their funds were told of a time-sensitive "opportunity" to roll over their funds and participate in an Initial Coin Offering (ICO) for BG2 tokens.
"Start Options investors were forced to take part in this "opportunity,"" prosecutors allege, adding that "all Start Options investors' accounts were rolled into new B2G accounts, and even those Start Options investors who tried to decline the "opportunity" were unable to cash in their shares."
Approximately $7 million of these proceeds was allegedly transferred from the promoter to Krstic -- who then stopped communicating with investors and "absconded" with the cash -- while Start Options claimed that the company had been sold to a Russian venture capitalist.
The US Securities and Exchange Commission (SEC) estimates that "hundreds" of investors may have been defrauded out of as much as $11 million through the "fraudulent and unregistered digital asset securities offerings."
The DoJ added that Krstic used the alias "Felix Logan" when communicating with investors in both companies. According to his alleged Twitter handle, which has posted a variety of Bitcoin-related content and messages, "Logan" left his post at Start Options in 2018.
Charges filed with the US Eastern District of New York court on Tuesday accuse Krstic of one count of securities fraud and conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud, and one count of conspiracy to commit money laundering.
John DeMarr, the ex-director of North American Operations for both companies -- and a former private investigator -- has been previously charged for his alleged participation.
On February 1, 2021, the SEC charged Krstic and DeMarr with violating antifraud and registration laws. The US agency is seeking damages, disgorgement of proceeds, penalties, and an officer/director ban for both individuals.
In addition, the SEC has also charged Robin Enos, who was allegedly drafted in to create promotional materials for the firms. Prosecutors say that Enos knew the content would be presented to investors and the material allegedly contained false statements -- such as the use of investor funds toward mineable coins, and the claim that the B2G coin would be offered on the Ethereum blockchain.
"Bitcoiin2Gen was a sham, and Krstic and DeMarr allegedly misappropriated millions of dollars of investor funds for their own personal benefit," the SEC says.
"The conduct alleged in this action was a blatant attempt to victimize those interested in digital asset technology and these defendants should be held accountable," commented Kristina Littman, the SEC Enforcement Division Cyber Unit chief. "In reality, we allege, these ventures were fraudulent enterprises aimed simply at misappropriating funds from investors."
In January, a US resident and former journalist, Jerry Ji Guo, was jailed for six months based on claims that he pretended to be a cryptocurrency and Initial Coin Offerings (ICOs) consultant to conduct investor fraud.
According to the DoJ, the 33-year-old promised investors that he would perform "consultancy, marketing, and publicity services" in return for crypto and cash investments, but these services never materialized. Guo must also pay $4.4 million in damages.
Previous and related coverage
- Fake ICO consultant sentenced for embezzling cryptocurrency now worth $20 million
- Miami mulls over paying worker salaries in Bitcoin
- Discord servers targeted in cryptocurrency exchange scam wave
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