In perhaps one of the most all encompassing arrests in the history of cryptocurrency scams, Blake Kantor, also known as Bill Gordon, was arrested yesterday on three different account of fraud.
The investigations into this alleged fraud and arrest included Richard P. Donoghue the United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), James D. Robnett, Special Agent-in-Charge, Internal Revenue Service Criminal Investigation, New York (IRS-CI), and James McDonald, Director, Division of Enforcement, U.S. Commodity Futures Trading Commission (CFTC).
The charges announced yesterday say that Blake Kantor established a company known as Blue Bit Banc or Blue Bit Analytics, Ltd. (“BBB”). This company is purported to have sold binary options.
Binary options are a type of investment where investors are promised an opportunity to be paid predetermined amounts based upon the price of securities, commodities or other investments at specific times.
From 2014 to 2017 Kantor and associates brought in a total of $2.1 million in investments from approximately 713 investors in the binary options scheme.
The problem is that investors were unaware that the computer software used by BBB allowed them to fraudulently alter data associated with the binary options investments to game the probability of investors earning a profit in favor of BBB at the disadvantage of the investors.
To further his scam Kantor directed the opening of bank accounts—including one in the Island nation of St. Kitts and Nevis using aliases and the identities of other people.
He furtheer involved the scam into a cryptocurrency known as ATM Coin, a near worthless cryptocurrency that Kantor mislead investors inot believe was worth substantial sums of money.
To even further complicate his troubles, in October 2017, Kantor ordered on of his co-conspirators to alter lists of Blue Bit Banc customers after the FBI had informed him that they were investigating his involvement in the binary options fraud.
When he met with FBI agents he falsely reported that he had not been involved in binary options since August 2013. However he didn’t tell them that he had established BBB in March 2014 and was employed there until October of 2017.
According to United States Attorney Donoghue:
As alleged, Kantor used a computer program to generate manipulated data to cheat hundreds of investors out of their hard-earned savings. To cover-up his fraudulent scheme, Kantor then lied to the FBI and ordered the alteration of documents that would assist agents in identifying his victims. We will continue to work closely with our law enforcement partners to vigorously prosecute individuals who defraud the investing public and obstruct law enforcement’s ability to detect and prosecute financial crimes.
FBI Assistant Director-in-Charge Sweeney stated:
The all-or-nothing option Kantor’s victims were offered at the onset of their investment had a predetermined ending, one in which they stood to face significant financial losses, as alleged. The odds were stacked against them from the beginning, while Kantor had everything to gain. The FBI will continue to be a major force in confronting those who think they can evade the law and make an easy profit off the misfortune of others.
IRS-CI Special Agent-in-Charge Robnett is quoting saying:
In addition to enforcing the nation’s tax laws, the Special Agents of IRS-Criminal Investigation take particular interest in cases where our expertise is warranted to uncover allegations of financial fraud. The allegations outlined in this indictment detail acts of deceit and offshore money movement in the evolving world of cryptocurrency, which impacts the trust investors have with our financial system.
The CFTC Division of Enforcement Director McDonald said:
The CFTC is committed to working in parallel with our law enforcement partners to ensure that fraudsters in our markets are brought to justice and customers are protected. This type of coordination is particularly important in cases like this one, where the alleged scheme stretched across multiple markets, including the market for virtual currencies.
There is a maximum 20 years in a federal prison for EACH of the conspiracy to commit wire fraud charges as well as the obstruction of an official proceeding charges.
There is an addition maximum of 5 years on the false statements charges. The government’s case is being handled by the Office’s Long Island Criminal Division.
Blae Kantor is 42 years of age and resides in Manhattan, New York.
The official charges may be found in the justice.gov press release.