A former Deutsche Bank investment banker was charged with engaging in a Ponzi-like cryptocurrency fraud in which he falsely promised investors “guaranteed” returns and used some of their money to pay off others.
(Bloomberg) — A former Deutsche Bank investment banker was charged with engaging in a Ponzi-like cryptocurrency fraud in which he falsely promised investors “guaranteed” returns and used some of their money to pay off others.
Rashawn Russell, 27, was arrested on Monday and accused by US prosecutors of defrauding multiple investors by telling them their funds would be used for crypto investments, when he was really using the money for personal expenses like gambling or to keep the alleged scheme going.
Read the indictment here
Russell “turned the demand for cryptocurrency investments into a scheme to defraud numerous investors in order to fund his lifestyle,” Breon Peace, the US attorney in Brooklyn, New York, said in a statement on Tuesday. “This office will continue to aggressively pursue fraudsters perpetrating these schemes against investors in the digital asset markets.”
Russell, who is charged with wire fraud, faces as many as 20 years in prison if convicted, Peace said.
Crypto Crackdown
The case is one of the latest in the government’s crackdown on cryptocurrency fraud. In February, Eddy Alexandre, of Valley Stream, New York, pleaded guilty to a commodities fraud scheme in which he admitted swindling hundreds of millions of dollars from investors in his EminiFX cryptocurrency and foreign exchange platform by lying to them about how their money would be invested.
Read More: Crypto Fund Fraud Leads to Guilty Plea, Return of $248.8 Million
Prosecutors allege that while Russell claimed to be a licensed broker, the former investment banking associate misappropriated investors’ funds and used them for his personal benefit. In a practice characteristic of Ponzi schemes, he is alleged to have used funds entrusted to him by some investors to repay others, in the absence of the gains he was touting.
He allegedly fabricated documents to string his clients along, sending one investor a screenshot of a bank balance of about $355,000 when it was really closer to $35,000.
At his arraignment on Tuesday afternoon, Russell, a resident of Brooklyn, pleaded not guilty through his lawyer Kurame James. He was released on a $200,000 bond, secured by the signatures of his parents, and ordered to return to court May 9. US Magistrate Judge Ramon Reyes said the defendant is engaged in plea negotiations with the US “that might negate the need for a trial.”
Reyes warned Russell not to contact investors, witnesses and others involved in the case, at the risk of losing his freedom on bail. A naturalized US citizen born in Jamaica, Russell was ordered to surrender his passports. Both he and James declined to comment on the indictment after the hearing.
Promises of Huge Returns
Deutsche Bank said it cooperates with law enforcement.
“The bank regularly supports law enforcement and regulatory oversight efforts, including appropriately responding to and cooperating with authorized investigations and proceedings,” spokesman Dylan Riddle said in a statement.
Russell, who worked for the bank between 2018 and 2021, solicited investments from friends, former classmates and former colleagues, according to prosecutors. He claimed he had developed a successful strategy for trading altcoin — digital currencies other than Bitcoin — and had earned returns for his clients in excess of 100% over a three-month period, according to the US.
To induce people to invest with him, he promised them a guaranteed fixed return, after three months, of as much as 25%, prosecutors claimed. As part of the alleged scheme, they said, he lied to his clients about the status of their investments.
When one sought to recoup their investment, Russell never sent the money, instead sending the investor a fabricated bank wire transfer confirmation that purported to show the return of the funds, according to prosecutors.
The case is US v. Rashawn Russell, 23-cr-152, US District Court, Eastern District of New York (Brooklyn).
(Updates with context on crypto crackdown and with arraignment in second section, and details of alleged fraud in third.)
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