Prosecutors say the scam was one of as many as 20 similar crypto frauds run by a group of Serbian nationals that bilked investors out of as much as $70 million
It was a crypto scam straight out of a Steven Seagal movie, featuring the action film star himself, a private eye, a staged kidnapping and millions of dollars that vanished into thin air.
Last week, John DeMarr, a 55-year-old California private investigator who had served as the frontman for the scam pleaded guilty to helping run the fraud.
Prosecutors say the fraud left nearly 500 investors out more than $11 million in cash and a mix of established cryptocurrencies that they had plunked into a purported crypto-mining operation — with the promise of up to 200% gains within 60-to-90 days.
But instead of reaping huge returns, the money was funnelled into accounts overseas controlled by Kristijan Krstic, an accused Serbian-Australian huckster living in the Philippines with a history of fraud allegations, federal prosecutors and investigators with the SEC said.
Last week, John DeMarr, a 55-year-old California private investigator who had served as the frontman for the scam pleaded guilty to helping run the fraud while pocketing nearly $2 million which he used to buy a Porsche and a BMW, pay off over $1 million in debts and finance a lavish renovation of his Seal Beach home.
He faces up to five years in prison when he is sentenced on Jan. 4, 2022.
A broader scam
Days after the indictment against DeMarr was announced in February, federal prosecutors in Texas unsealed a broader criminal indictment against Krstic and 15 other defendants, many of them Serbian nationals, on wire fraud and money laundering charges. In that case, the group is accused of running as many as 20 similar cryptocurrency scams that bilked investors out of as much as $70 million.
The SEC has said it believes Krstic is in custody in Serbia, but his exact whereabouts are unknown, so when it attempted to serve him with a separate civil suit, it had to take out an ad in a Serbian newspaper. Krstic couldn’t immediately be contacted for comment.
Investigators say DeMarr joined forces with Krstic in 2017 to launch Start Options, an online investment platform that provided cryptocurrency mining, trading, and digital asset trading services. Because Krstic had been accused of running Ponzi schemes in Australia and Canada in the past, he assumed the alias of Felix Logan for the scheme, serving as Start Options’ chief financial officer, the SEC said.
DeMarr’s attorney said his client was unaware of Krstic’s real identity until more than a year after the scheme was launched.
Investors were provided with false statements showing their money was growing, despite the fact it hadn’t actually hadn’t been invested in anything, prosecutors said.
The outfit purported that it ran giant crypto-mining farms in China and could deliver between 25% and 200% returns within two months, depending on how much money was invested. Investors were provided with false statements showing their money was growing, despite the fact it hadn’t actually hadn’t been invested in anything, prosecutors said.
When two months had passed and investors began asking for their money, they were told it was being rolled over to the initial offering of a new cryptocurrency known as Bitcoiin2Gen (or B2G), with the promise that they would receive an additional coin free for everyone they had invested. While investors were told they could pull out at any time, no one was given their money back, the SEC said.
Investigators say DeMarr then hired a former lawyer who had lost his license to craft press releases and technical white papers on the launch, most of which was copied from the white papers of other, successful cryptocurrency launches. DeMarr began promising investors the new currency would deliver 8,000 times return, the SEC said.
Enter Steven Seagal
This is when Steven Seagal, star of martial arts and action films like “Under Siege” and “Above the Law,” made his appearance, surfacing in promotional materials for B2G.
“Zen Master Steven Seagal Has Become the Brand Ambassador of Bitcoiin2Gen,” read one press release, in which it was claimed he was an investor in the new currency and that he “wholeheartedly” endorsed the offering. On social media, Seagal urged his then-nearly 7 million followers on Facebook FB, -0.20% and 100,000 on Twitter TWTR, -0.72% to not “miss out” on the B2G opportunity.
What was left unsaid was that Seagal was being paid to be a spokesman, with the promise of $250,000 plus $750,000 in B2G coin for his time, the SEC said.
