Crypto escrow company head charged with $7M fraud scheme by US DOJ

Federal authorities in New York charged the principal of a cryptocurrency escrow company with multiple fraud charges after slipping away $7 million to purchase Bitcoin that never materialized.

The U.S. Attorney’s Office of the Southern District of New York, part of the Department of Justice (DOJ), has charged Jon Barry Thompson, head of Volatnis Escrow Platform LLC, with two counts each of commodity and wire fraud.

A now-unsealed criminal complaint alleged Thompson of making misleading statements about investment risks and false representations of his custody and control of digital assets.

Thompson reportedly lured his victims by presenting himself as an investor, custodian, and financier. He promised that his company will “minimize settlement default risk” by acting as a custodian of assets for large-scale transactions for “both sides of transactions.”

“As his clients soon realized, however, Thompson’s representations were false, and these cryptocurrency investors ultimately lost all of the money they had entrusted with him because of his lies,” U.S. Attorney Geoffrey S. Berman said.

The two defrauded companies purportedly wired multi-million dollars to Thompson, with hopes to receive bitcoin in exchange. Although he did send their $3 million to a third-party exchange, he allegedly splurged thousands for personal use without obtaining any bitcoin first.

“Using phrases and terminology that the victim companies didn’t understand, he allegedly preyed on their ignorance of the emerging cryptocurrency,” William Sweeney Jr., FBI Assistant Director-in-Charge, said.

Thompson was arrested on early Thursday morning in Easton, Pennsylvania and faces maximum jail time of 40 years.

Meanwhile, the FBI is also probing the 2017 blockchain pivot of then-beverage firm Long Island Iced Tea for evidence of insider trading and securities fraud. Authorities are reportedly seeking evidence for a possible “pump-and-dump” scheme that involves the company’s stock.