Ex-Beverly Hills Attorney Faces $14M Restitution for $9.5M Crypto Ponzi Scheme

On Monday, a U.S. judge ordered an 85-year-old disbarred attorney from California to pay $14 million in restitution for his involvement in a $9.5 million cryptocurrency Ponzi scheme. The attorney, David Kagel, who previously practiced law in Beverly Hills, admitted his guilt in May, pleading guilty to one count of conspiracy to commit fraud.

In the Las Vegas case, U.S. District Judge Gloria Navarro sentenced Kagel to five years of probation and heavy fines. The sentence emphasizes the gravity of Kagel’s role in the fraud, which exploited naïve investors.

Prosecutors revealed that Kagel played a crucial part in promoting the fraudulent investment scheme. He issued letters using the letterhead of his firm while working as an attorney, providing victims with a fictional sense of security and legality. As a result of these letters, many people invested their money under false pretenses, fostering trust in the plan.

According to a Reuters report, victims believed the program was backed by trading bots that would invest in cryptocurrency on their behalf. They were further misled by Kagel’s claim of holding $11 million in escrow, which falsely guaranteed the safety of their investments. The scheme capitalized on these fabricated assurances, causing significant financial harm to the victims.

In 2023, Kagel’s legal career came to a definitive end. The California Supreme Court revoked his license after he failed to address disciplinary charges. Records show that he had misappropriated $25,000 in client funds, which he used to further the Ponzi scheme.

Kagel misappropriated a large amount of the victims’ money. Rather than investing the funds, he used them for personal indulgences, such as renting a private chef, a private security service, a private jet, luxury hotel stays, and a private residence, according to court filings. The trust and financial security of his clients were sacrificed to support his lavish lifestyle.

The crypto investment schemes promoted by Kagel and his co-conspirators promised high returns that were never delivered. Authorities described these programs as carefully constructed to lure investors and exploit their desire for financial growth.

“Kagel preyed on trusting individuals through a complex scheme to separate people from their hard-earned money,” said Tyler Hatcher, a special agent in charge of the IRS Criminal Investigation, back in May. Hatcher commended the meticulous efforts of IRS investigators, highlighting their function in tracking the money path to establish a strong case against the guilty.

The investigation didn’t stop with Kagel. Two other individuals—David Gilbert Saffron, an Australian national, and Vincent Anthony Mazzotta Jr., from Los Angeles—were also implicated. Both co-conspirators have pleaded not guilty and are awaiting trial in federal court in Los Angeles. Saffron and Mazzotta allegedly publicized investment schemes under a variety of names, including Bitcoin Wealth Management, Cloud9 Capital, Circle Society, Omicron Trust, and Mind Capital.

According to a U.S. Department of Justice press release on May 29, the Ponzi schemes promoted by this group operated under various names, including Circle Society, Bitcoin Wealth Management, Omicron Trust, Mind Capital, and Cloud9Capital. Potential investors were lured in by these names, which created the false impression of reputable and varied high-yield return chances. The truth was a carefully planned scam that enriched the conspirators at the expense of their victims.

Scam Sniffer, a Web3 anti-scam platform, revealed that more than 10,000 people lost over $46 million to such frauds in September alone. The platform stated that last month, 10,805 individuals lost $46.7 million as a result of various crypto phishing scams.