Former New York Banker Faces Criminal Charges for Crypto Scam

A New York-based former investment banker and registered broker, Rashawn Russell, was arrested on Monday for running a cryptocurrency investment fraud scheme. The US prosecutors brought fraud charges against him, carrying a maximum prison time of 20 years. He pled 'not guilty' at a Tuesday afternoon hearing in Brooklyn federal court.

Alleged Fraudster Faces Criminal and Civil Charges

In addition, the Commodity Futures Trading Commission (CFTC) fled a civil enforcement action lawsuit against Russell for fraudulently soliciting retail investors to invest in a digital asset trading fund. He is blamed for misappropriating at least $1 million in investor assets.

“As alleged, Russell turned the demand for cryptocurrency investments into a scheme to defraud numerous investors in order to fund his lifestyle,” United States Attorney Breon Peace said.

A Massive Crypto Investment Scam

According to the court documents, Russell operated the fraudulent investment scheme from around November 2020 through to July 2022. He lured retail investors into his digital assets trading fund with ‘guaranteed no losses’ and a minimum return of 25 percent. He received investments in Bitcoin, Ether, and fiat currencies.

In reality, Russell’s scheme was a sham, as he made false statements about the fund’s structure, size, and performance. He traded with a small portion of investors’ proceeds and misappropriated the funds for his personal benefit, to gamble, and to repay other investors, which also makes it a Ponzi scheme.

Russell even falsely promised to pay the investors on withdrawal requests and even sent an altered bank statement to one of the investors, showing the fund’s fake liquidity. In another instance, he sent another fabricated bank wire transfer confirmation to an investor who requested a withdrawal but, in reality, did not return the money.

“As today’s action demonstrates, the CFTC is unrelenting in holding bad actors accountable and protecting retail investors from fraud in the digital asset space,” said CFTC’s Director of Enforcement, Ian McGinley.

The CFTC is now seeking to recover the investors’ funds from Russell. Furthermore, the agency wants to impose a civil monetary penalty on the defendant and is moving for permanent trading and registration bans.

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