USAOs Bring Two More Cryptocurrency Related Fraud Actions

All things cryptocurrency related continue to be significant draws for investors. Unfortunately that attraction often leads to a loss of investor cash. The losses, however, are not typically from the cryptocurrency but from the fact that the unscrupulous use the near magnetic attraction of things like “tokens,” “Bitcoin” and “blockchain” to draw investors whose money can then be misappropriated. Two recent schemes of this type are being prosecuted by the U.S. Attorney’s Offices in the Southern and Eastern Districts of New York. U.S. v. Haddow, No. 1:17-mj-04939 (S.D.N.Y.); U.S. v Kantor, No. 18-CR-177 (E.D.N.Y.).

Defendant Renwick Haddow, a U.K. citizens also known as Jonathan Black, was extradited from Morocco and returned to New York last week. In June of 2017 he was charged in a criminal complaint with conducting two fraudulent schemes. Prosecution of the case had to await his extradition from Morocco.

Bitcoin Store Inc. was at the center of one scheme operated by Mr. Haddow. A second scheme focused on Bar Works Inc. Over a three year period, beginning in November 2017, Mr. Haddow solicited investments for his two start-up enterprises. Bitcoin Store claimed to be an online platform for purchasing, selling and storing the digital currency known as “Bitcoin.” Barworks claimed to be engaged in the business of adopting restaurants, bar premises and other locations into co-working spaces.

Investors were solicited for the two firms with a series of misrepresentations. Mr. Haddow concealed his interest in Bitcoin Store for example. Rather he claimed the firm was operated by an experienced team of investment professionals which was false. Defendant Haddow used a similar approach with Barworks. There he claimed that Jonathan Black had an extensive background in finance. Mr. Black also was claimed to have had a role in setting up “Car Share,” a car-sharing app. Again the claims were false.

Investors were solicited through agent brokers and inCrowd Equity Inc., an app Mr. Haddow controlled. It was claimed to be a kind of crowdfunding portal through which investors could purchase shares of start-ups that supposedly had been vetted by inCrowd. Investors were unaware that Mr. Haddow controlled inCrowd and had interests in the firms being recommended. Defendant Haddow misappropriated the investor funds raised. He has been charged with two counts of wire fraud, one relating to each venture. The case is pending. See also SEC v. Haddow, Civil Action No. 1:17-cv-04950 (S.D.N.Y. Filed June 30, 2017).

Defendant Blake Kantor, also known as Bill Gordon, conducted a fraudulent investment scheme in which investor cash was converted to what was represented to be a valuable cryptocurrency – ATM Coin. Beginning in March 2014 Mr. Kantor established the Blue Bit Banc or Blue Bit Analytics, Inc. The firm sold binary options, a form of highly speculative investment that has been banned in some countries. Over a three year period Mr. Kantor and his confederates solicited investors for Blue Bit Bank, raising about $2.1 million from approximately 713 investors. Investors were not told that the computer software used by Blue Bit altered the data used in connection with the binary options in a manner which made it most difficult for them to make a profit. Investors were also not told that the ATM Coin they received was worthless.

In October 2017 Mr. Kantor and others involved with the scheme took steps to evade detection. Customer lists were altered after FBI agents told Mr. Kantor that they were investigating. Mr. Kantor also met with the agents and misinformed them about the business, claiming he had not had any involvement with it for a period of time. Defendant Kantor is charged with conspiracy to commit wire fraud, obstruction of an official proceeding and making false statements to Special Agents of the FBI. The case is pending.