Skip to content Skip to sidebar Skip to footer

On June 30, the DOJ charged six individuals in four separate cases for a fraudulent NFT trading scheme.
The first case alleged that an individual committed wire fraud and engaged in a conspiracy to commit international money laundering in connection with a high-profile NFT. The individual charged allegedly engaged in a “rug pull,” by ending the NFT project, deleting its website, and retaining all of the investors’ money. The DOJ also alleges that the individual laundered investors’ funds through “chain-hopping,” a form of money laundering in which one type of coin is converted to another type, and funds are moved across multiple blockchains and crypto mixers totaling $2.6 million from investors.
The second case charged three individuals with conspiracy to commit wire fraud and conspiracy to commit securities fraud in connection with a global cryptocurrency-based Ponzi scheme that generated approximately $100 million from investors. Two of the individuals were also charged with conspiracy to commit international money laundering. The DOJ alleges the individuals engaged in an unregistered securities offering, by making numerous misrepresentations regarding a purported proprietary trading bot and fraudulently guaranteeing returns to investors and prospective investors. The DOJ alleges that the individuals laundered investors’ funds through a foreign-based cryptocurrency exchange and operated a Ponzi scheme by paying earlier investors with money obtained from later investors.
The third case involved the CEO of a cryptocurrency investment platform, who was charged with one count of securities fraud for his role in a cryptocurrency fraud scheme involving an initial coin offering, which raised approximately $21 million from investors in the U.S. and overseas. The CEO allegedly falsified the coin’s whitepaper, planted fake testimonials on the website, and fabricated purported business relationships with the Federal Reserve Board and dozens of prominent companies.
The fourth case involved the owner of a cryptocurrency investment platform, who allegedly solicited investors to participate in an unregistered commodity pool, which is a fund that combines investors’ contributions to trade on the futures and commodity markets. The owner allegedly represented to investors that he traded investors’ funds to earn profits using a trading bot that could execute over 17,000 transactions per hour on various cryptocurrency exchanges and that his trading bot would generate between 500% to 600% returns on the amount invested. The DOJ alleges the owner fraudulently raised approximately $12 million from investors.
Putting It Into Practice: It is likely that crypto and NFT-related enforcement matters will continue to increase at a faster pace. It remains crucial for market participants to ensure they have the proper state and federal licenses and registrations required to offer their products. These enforcement actions should be viewed in light of the recent federal push to regulate blockchain and related technologies (we have discussed this push in previous blog posts here).
About this Author
Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm’s Los Angeles and San Francisco offices. 
Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,…
A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm’s Washington, D.C. office. 
A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.
With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving…
Gabriel is an Associate on the Telecom team and the Co-Lead Associate on the Blockchain and Digital Assets team in the firm’s Washington, D.C. office. He is a Blockchain Law Professional as Certified by the Blockchain Council.
At Sheppard Mullin, Gabriel assists the Telecom team in all aspects of communications law and regulation including, satellites, spectrum, 5G implementation, media companies, and new technologies. He assists the Blockchain and Digital Assets team in legal issues relating to the use of blockchain technology, social media, internet, video games, online gambling,…
As a woman owned company, The National Law Review is a certified member of the Women's Business Enterprise National Council
You are responsible for reading, understanding and agreeing to the National Law Review’s (NLR’s) and the National Law Forum LLC’s  Terms of Use and Privacy Policy before using the National Law Review website. The National Law Review is a free to use, no-log in database of legal and business articles. The content and links on are intended for general information purposes only. Any legal analysis, legislative updates or other content and links should not be construed as legal or professional advice or a substitute for such advice. No attorney-client or confidential relationship is formed by the transmission of information between you and the National Law Review website or any of the law firms, attorneys or other professionals or organizations who include content on the National Law Review website. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor.  
Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. The National Law Review is not a law firm nor is  intended to be  a referral service for attorneys and/or other professionals. The NLR does not wish, nor does it intend, to solicit the business of anyone or to refer anyone to an attorney or other professional.  NLR does not answer legal questions nor will we refer you to an attorney or other professional if you request such information from us. 
Under certain state laws the following statements may be required on this website and we have included them in order to be in full compliance with these rules. The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. Attorney Advertising Notice: Prior results do not guarantee a similar outcome. Statement in compliance with Texas Rules of Professional Conduct. Unless otherwise noted, attorneys are not certified by the Texas Board of Legal Specialization, nor can NLR attest to the accuracy of any notation of Legal Specialization or other Professional Credentials.
The National Law Review – National Law Forum LLC 3 Grant Square #141 Hinsdale, IL 60521  Telephone  (708) 357-3317 or toll free (877) 357-3317.  If you would ike to contact us via email please click here.


Leave a comment