The United States Department of Justice (DOJ) has sentenced a 25-year-old Rhode Island cryptocurrency trader, popularly known as Coin Signals, to 42 months in prison for defrauding more than 170 people from over $5 million.
Coin signals trader doomed
According to an official Press releasethe convict, Jeremy Spence, had solicited funds from investors through several crypto investment pools, which he ran from November 2017 to April 2019.
He has created and managed several crypto funds, including the three largest: the Coin Signals Bitmex Fund, the Coin Signals Alternative Fund and the Coin Signals Long Term Fund. Spence claimed that his trades are doing well and generating huge profits, prompting investors to send him cryptocurrencies like BTC and ETH to operate on their behalf.
Using false claims to lure investors
At one point, he even posted a message in an online discussion group falsely claiming that his investor fund trades over the past month had returned over 148%. As a result, some investors sent him additional funds.
The Justice Department, however, pointed out that Spence’s claims were far from the truth.
“SPENCE solicited over $5 million through misrepresentations, including that SPENCE’s crypto trade had been extremely profitable when, in fact, SPENCE’s trade had always been unprofitable…
In fact, during this same roughly one-month period, SPENCE’s trades resulted in net losses in accounts in which it traded investor funds,” the DOJ noted.
To cover the net losses he incurred while trading with investors’ funds, Spence created fake account balances to continue fundraising and began operating a Ponzi scheme.
He used funds from new investors to pay off old ones and kept the ruse going for as long as possible. He was able to distribute over $2 million worth of crypto assets to investors through the program.
“Instead of accurately reporting the trading losses SPENCE was experiencing, account balances incorrectly told investors that they were making money investing with SPENCE,” the DOJ added.
Spence pleads guilty
Spence was stopped in January 2021 by the Federal Bureau of Investigation (FBI), and separate civil charges have been brought against him by the Commodity Futures Trading Commission (CFTC). He pleaded guilty of the charges in November 2021.
In addition to his 42-month prison sentence, Spence will have three years of probation and will pay more than $2 million in compensation after his release.
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