A former investment banker from Brooklyn was formally charged Tuesday with allegedly stealing a fortune from cryptocurrency investors to gamble and pay off other investors in a quasi-Ponzi scheme.
Rashawn Russell, 27, a registered broker with the Financial Industry Regulatory Authority, is due to be arraigned in U.S. District Court in Downtown Brooklyn on April 11, a day after his arrest.
As alleged in court documents, Russell defrauded a number of investors by falsely promising that their money would be used for cryptocurrency investments that would generate large — oftentimes “guaranteed” — returns. Meanwhile, Russell was using most of that money to gamble and to repay other investors, according to the indictment.
“As alleged, Russell turned the demand for cryptocurrency investments into a scheme to defraud numerous investors in order to fund his lifestyle,” stated United States Attorney for the Eastern District of New York Breon Peace in a statement. “This office will continue to aggressively pursue fraudsters perpetrating these schemes against investors in the digital asset markets.”
Russell stands accused of lying to his investors about the status of their phony investments, and of falsifying multiple documents that he sent to those lenders. As alleged, the former Brooklyn banker sent one investor an altered image of a bank balance displayed on a bank website that purported to show Russell’s substantial liquidity.
When another investor sought to recoup their investment, Peace’s office said, Russell never sent the money and instead sent the investor a fabricated bank wire transfer confirmation that purported to show the return of the investor’s money.
If convicted, Russell faces a maximum of 20 years in prison.
Russell’s arrest in the alleged cryptocurrency scheme comes on the heels of another great year for the digital currency — Bitcoin has gained more than 80% in price so far this year, the New York Times reported Tuesday, extending its gains and outperforming a number of other assets.
Cryptocurrency’s gains also coincide with the nation’s banking sector in turmoil, the Times reported. The cryptocurrency is up more than 45% since the collapse of Silicon Valley Bank last month.