A trader on Localbitcoins and Paxful has pleaded guilty to charges in connection with a couple of bitcoin scams. The U.S. Department of Justice alleges that the trader knowingly sold bitcoin to victims of fraudulent schemes.
Bitcoin Trader Facing Jail Time
The U.S. Department of Justice (DOJ) announced last week that a Boston man has pleaded guilty in federal court to his role in two bitcoin fraud schemes. Austin Nedved “pleaded guilty to aiding and abetting wire fraud and money laundering conspiracy,” the DOJ detailed, adding that the 29-year-old is currently “in custody serving a sentence for a separate fraud conviction.” The announcement states:
Nedved admitted that he ran a business in which he bought and sold digital currencies, including bitcoin, for cash. Nedved advertised his services under the screen name ‘usmc1991’ over Localbitcoins.com and Paxful.com.
The Justice Department described that he “aided and abetted romance and lottery schemes targeting vulnerable victims.” In romance schemes, victims believe they are in love with the scammers and send money abroard in the form of bitcoin. In lottery schemes, victims believe that “they can obtain lottery winnings or sizeable government grants by forwarding cash for administrative fees or expenses to the fraudsters,” the DOJ described.
In late 2017, a scammer posed as an American owner of an oil company and succeeded in making a 78-year-old fall in love with him. Without ever meeting in person, she agreed to marry him. The scammer then told her that his oil company “had experienced an accident abroad in which people had died, and that he needed money to settle obligations arising from the accident with a foreign government.” He convinced her that unless she sent him some bitcoins to pay the settlement, he would not be able to return to the U.S. and marry her.
The victim, who never purchased bitcoin before, contacted Nedved in June 2018. They met in a parking lot in Maine and she purchased about $100,000 worth of BTC with cash. Nedved then transferred the coins to a wallet controlled by the scammer.
The DOJ alleged that when Nedved accepted $100,000 from the 78-year-old, he knew that she was a romance scam victim. Nonetheless, he and his co-conspirator took another $40,000 from her. According to the DOJ:
Despite knowing or being willfully blind to the fact that his customers were fraud victims, Nedved sold bitcoin to them so that they could send money overseas to the fraudsters.
In total, Nedved and his co-conspirators sold more than $630,000 worth of BTC to bitcoin scam victims, the DOJ claimed, alleging that they knew “that the cash constituted proceeds of romance and lottery scams and other unlawful activities.”
The Department of Justice explained that “The charges of aiding and abetting wire fraud provide for a sentence of up to 20 years in prison, three years of supervised release and a fine of up to $250,000 or twice the gross gain or loss, whichever is greater.” In addition, “The charge of money laundering conspiracy provides for a sentence of up to 20 years in prison, three years of supervised release and a fine of up to $500,000 or twice the value of the funds involved in the financial transactions that were the object of conspiracy.”
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