BOSTON (reuters) – The founder of a Nevada-based company was arrested on Wednesday on federal charges that he participated in a $6 million scheme to cheat people who want to buy a virtual currency called My Big Coin that he claimed was backed by gold.
FILE PHOTO: Explanations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are to be seen on a PC motherboard in this illustration, image, February 13, 2018. REUTERS/dado Ruvic/Image/File Photo
Randall Crater, the main operator of My Big Coin Pay Inc, was arrested in Florida after being charged in a criminal complaint filed in federal court in Boston with seven counts of wire fraud and illegal financial transactions.
The indictment came after the U.S. Commodity Futures Trading Commission last year sued the company, Crater, and three others associated with My Big Coin Pay Inc and accused them of participation in a fraudulent virtual currency scheme.
The lawsuit led to one of the first decisions of the court holding that a virtual currency can be regarded as a commodity within the jurisdiction of the US derivatives regulator. That civil case is still pending.
A lawyer for the Crater of East Hampton, New York, did not immediately respond to a request for comment. Crater, 48, in court papers filed in the CFTC’s lawsuit denies the allegations.
The case against Crater is one of many that U.S. prosecutors and regulators have recently pursued in the midst of the worry about fraud schemes targeting cryptocurrency users.
Prosecutors said between 2014 and 2017, Crater and others sought to defraud investors by soliciting investments in My Large Coin, which they falsely claimed was backed by gold and can be traded at a virtual currency exchange.
In Jan. 28, 2015, e-mail, Crater told an investor that “we have 300 million in gold that support us,” the indictment said.
She suggested that the website of the company also falsely claimed the virtual currency backed by gold, could be transferred to anybody, and can be used to shop in a store that is accepted.
Instead of the use of the funds, as promised, the Crater of embezzlement of $6 million for his personal use, such as the purchase of works of art, antiques and jewelry, the indictment said.
In the related lawsuit, the CFTC alleged the $6 million came from at least 28 customers that the said Crater, and others asked to buy My Coin, of which the name was reminiscent of the widely popular virtual currency bitcoin.
The case is U.S. v. Crater, the U. S. District Court, District of Massachusetts, No. 19-cr-10063.
Reporting by Nate Raymond in Boston; Editing by Paul Commented