Cryptsy CEO Charged with Defrauding Crypto Investors and Destruction of Evidence – Regulation

The CEO of cryptocurrency exchange Cryptsy has been indicted in the US. The 17-count indictment accuses the cryptocurrency exchange's CEO of "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.

Cryptsy's CEO faces 17 counts of indictment

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

A 17-count indictment was unsealed charging Vernon, 48, with "criminal violations for his involvement in an elaborate 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 items, and destruction of records in a federal investigation.

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

However, "between May 2013 and May 2015, Vernon used his control over Cryptsy's accounts, known as wallets, to steal over $1 million from Cryptsy's cryptocurrency wallets," the DOJ said.

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

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

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

Nonetheless, the platform continued to operate normally for six months, recruiting new customers without telling them that their security had been compromised, the Justice Department said.

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

The Justice Department 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 of customer funds, and destroyed the customer database to hide his illegal activities.

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

What do you think about this case? Let us know in the comments section below.

Kevin Helms

As a student of Austrian economics, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects, and the interface between economics and cryptography.

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