DOJ Targets Fraud in the Cryptocurrency Space

On February 27, 2019, the Department of Justice (“DOJ”) announced the indictment of Randall Crater, founder and principal operator of My Big Coin Pay Inc. (“My Big Coin”) by a federal grand jury sitting for the District of Massachusetts for his alleged participation in a scheme to defraud investors by marketing and selling fraudulent virtual currency.[1] Mr. Crater is charged with four counts of wire fraud and three counts of unlawful money transactions.

The indictment alleges that between 2014 and 2017, Mr. Crater, along with two unnamed co-conspirators, created and marketed fraudulent virtual currency referred to as “My Big Coins” or “Coins” to investors.  Mr. Crater allegedly falsely claimed that My Big Coins were a “functioning virtual currency that had value, were back by gold and other assets, and could be traded on virtual currency exchange[s].”  To facilitate the alleged scheme, Mr. Crater and others, created websites and social media accounts to “broadcast misrepresentations about My Big Coins” in addition to directly soliciting investors and proposed investors. Investors were allegedly instructed to wire or send money to accounts owned by Mr. Crater, including accounts held by his family members, in order to purchase Coins. Once making a purchase, the investors would receive false information about their Coins, including false balances of Coins in their accounts and false representations on the My Big Coin website about the value of the Coins increasing over time. The indictment alleges that, in reality, My Big Coins (1) were not backed by gold or any other valuable, tangible assets; (2) were not readily transferable; and (3) had little to no actual value. Instead, it is alleged that Mr. Crater misled his investors and then misappropriated over $6 million in investor funds for personal use, such as purchasing artwork, jewelry, antiques and similar luxury items.

The indictment reaffirms the DOJ’s commitment to investigating and prosecuting criminal and regulatory investigations against perceived bad actors in various marketplaces, including a focus on emerging digital products. In previous blog posts, Goodwin reviewed and analyzed the DOJ’s Task Force on Market Integrity and Consumer Fraud and the SEC’s coordination with the DOJ.

[1] United States v. Randall Crater, 19-cr-10063 (D. Mass, filed Feb. 26, 2019).