Cryptsy CEO Indicted for Defrauding Crypto Investors, Destroying Evidence

The CEO of cryptocurrency exchange Cryptsy has been indicted in the U.S. The 17-count indictment charges the crypto exchange executive with “tax evasion, wire fraud, money laundering, computer fraud, tampering with records, documents, and other objects, and destruction of records in a federal investigation,” the DOJ said.

The U.S. Department of Justice (DOJ) announced Wednesday that Paul E. Vernon, the founder, operator, and chief executive officer (CEO) of Project Investors Inc., doing business as Cryptsy, has been indicted.

A 17-count indictment was unsealed charging Vernon, 48, “with criminal violations for his involvement in a sophisticated theft scheme involving his cryptocurrency exchange,” the announcement details, adding:

The charges include tax evasion, wire fraud, money laundering, computer fraud, tampering with records, documents, and other objects, and destruction of records in a federal investigation.

According to the indictment, Vernon solicited investors to store and trade cryptocurrencies on the Cryptsy platform.

However, “Between May 2013 through May 2015, Vernon used his control over Cryptsy’s accounts, known as wallets, to steal over one million dollars from Cryptsy’s cryptocurrency wallets,” the DOJ said.

He then deposited the stolen funds into his personal crypto wallet, which he subsequently transferred to his personal bank account. The DOJ emphasized:

At no time during this time period did Vernon disclose this theft of his customers’ funds from his customers’ Cryptsy wallets.

In July 2014, Vernon informed Cryptsy employees that the exchange had been hacked by unidentified hackers and more than five million dollars’ worth of bitcoin and other cryptocurrencies were stolen.

Nonetheless, the platform continued to operate normally for six months, soliciting new customers, without disclosing to them that its security had been compromised, the justice department explained.

In November 2015, Vernon abruptly moved to China and publicly told Cryptsy customers about the 2014 hack and loss of bitcoins and other cryptocurrencies.

The Department of Justice further noted that after being notified that Cryptsy was in receivership in April 2016:

Vernon hacked into Cryptsy servers from a remote location, stole Cryptsy’s database containing customers’ funds, and destroyed the customer database to conceal his illicit activity.

Furthermore, the indictment alleges that Vernon attempted to evade his federal income tax obligations for 2014 and 2015.

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