Randall Crater "saw the burgeoning popularity of crypto as a chance to get rich quick through an unscrupulous fraud scheme cloaked by flashy marketing tactics and outright lies," a federal prosecutor said Thursday in announcing Mr. Crater's conviction on charges of wire fraud and other illegal monetary transactions. His trial was held in U.S. District Court in Boston.
Mr. Crater, of East Hampton, will be sentenced on Oct. 27 by Justice Denise J. Casper after a federal jury found him guilty of four counts of wire fraud, three counts of unlawful monetary transactions, and one count of operating an unlicensed money transmitting business.
According to a court announcement released on Thursday, Mr. Crater, 51, was arrested in 2019 in a case involving a fraudulent cryptocurrency and virtual payment services company that he founded, known as My Big Coin Pay Inc. He is said to have bilked investors out of $6 million between 2013 and 2017 on the premise that he was running "a fully functioning cryptocurrency backed by $300 million in gold, oil, and other valuable assets," which he claimed had a partnership with MasterCard, and that the "Coins" could be "exchanged for government-backed paper currency or other virtual currencies."
"In reality, Coins were not backed by gold or other valuable assets, did not have a partnership with MasterCard, and were not readily transferable," the court said. "Over the course of the scheme, Crater misappropriated over $6 million of investor funds for his own personal gain and spending on goods, including hundreds of thousands of dollars' worth of expenses on antiques, artwork, and jewelry."
The defendant operated the scheme via text messages and email, social media, and other online tools. The F.B.I., the U.S. Postal Inspection Service's Criminal Investigations Group, and the Commodity Futures Trading Commission helped investigate the case.
Mr. Crater likely has a long time behind bars in his future. The federal charge of wire fraud carries a sentence of up to 20 years in prison with three years of supervised release and a fine of $250,000, or twice the gross gain or loss. Those convicted of unlawful monetary transaction charges face 10 years in prison, three years of supervised release, and a fine of $250,000, or twice the value of the criminally derived property. The final charge, operating an unlicensed money-transmitting business, carries a sentence of five years in prison, three years of supervised release, and a fine of $250,000, or twice the gross gain or loss.
Sentences are finalized at the judge's discretion, and can run concurrently.
The prosecutor, Rachael S. Rollins, called Mr. Crater "just another fraudster who made his way into the booming world of cryptocurrency." The conviction, she said, "sends a clear message that we are monitoring the digital currency realm and bad actors will be found and prosecuted."
Mr. Crater's alleged co-conspirators, John Roche, Mark Gillespie, and Michael Kruger, are facing civil charges. A federal judge pushed pause on that case in 2019, pending the outcome of the criminal proceedings against Mr. Crater.
