The co-founder of AirBit Club, a cryptocurrency pyramid scheme that defrauded investors of more than $100 million, has been handed a 12-year prison sentence for his role in the fraudulent operation. This comes after the co-founder, Rodriguez, pleaded guilty to wire fraud conspiracy charges in a United States District Court in March.
Damian Williams, the United States Attorney for the Southern District of New York, stated that Rodriguez preyed on unsophisticated investors by making false promises that their funds would be invested in legitimate cryptocurrency trading and mining ventures. However, instead of investing the money as promised, Rodriguez engaged in a complex laundering scheme using Bitcoin, an attorney trust account, and international front and shell companies. He used the victims’ funds for personal gain, “lining his own pockets.”
In addition to the prison sentence, District Court Judge George B. Daniels imposed an additional three years of supervised release for Rodriguez. Furthermore, Rodriguez was ordered to pay a forfeiture of $65 million and forfeit other assets, including 3,800 Bitcoins worth $100 million, his Irvine residence in California, $900,000 in U.S. dollars seized from the property, and nearly $1 million previously held in escrow for a Gulfstream Jet.
The other defendants involved in the AirBit Club fraud, namely Dos Santos, Scott Hughes, Cecilia Millan, and Karina Chairez, have also pleaded guilty and are currently awaiting their sentencing verdicts.
AirBit Club was established in 2015, luring potential investors with the promise of earning returns through cryptocurrency mining and trading. Victims were led to believe that they would receive guaranteed daily returns on their membership purchases. However, as early as 2016, members encountered various obstacles when attempting to withdraw their proceeds, including excuses, delays, and hidden fees. To receive their returns, they were informed that they had to recruit new members into the club.
The DOJ charged the operators of AirBit Club, including Rodriguez, with fraud and money laundering in August 2020 following an investigation by the United States Homeland Security Investigations.
According to a report by blockchain intelligence firm TRM Labs, in 2022, approximately $7.6 billion was lost to cryptocurrency Ponzi and pyramid schemes. The prevalence of such schemes highlights the need for investors to exercise caution and conduct thorough due diligence before investing in any cryptocurrency project.
It is essential for individuals to be able to distinguish between legitimate cryptocurrency ventures and fraudulent schemes. Educating oneself on the signs of a Ponzi or pyramid scheme can help protect against falling victim to these scams.
Overall, the sentencing of Rodriguez serves as a reminder of the consequences that await those who engage in fraudulent activities within the cryptocurrency industry. Authorities and regulatory bodies continue to work together to identify and prosecute individuals involved in such schemes in order to safeguard investors and maintain the integrity of the crypto market.