Feds Indict Alleged Crypto Scammer on Wide-Ranging $1B Fraud Case
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Feds Indict Alleged Crypto Scammer on Wide-Ranging $1B Fraud Case

Created 6mo ago, last updated 6mo ago

Exiled Chinese businessman Guo Wengui was accused of defrauding investors in a number of schemes, including a Himalaya Coin Scam that netted as much as $600 million.

Feds Indict Alleged Crypto Scammer on Wide-Ranging $1B Fraud Case

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When someone is charged with defrauding investors of more than $1 billion, the most interesting part of the indictments are, invariably, the juicy tidbits about what they bought with their allegedly ill-gotten gains.

So it is in the case of Guo Wengui, an exiled Chinese businessman with strong ties to Donald Trump advisor Steve Bannon — who was arrested on Guo's $37 million yacht in 2020.

Charged with a series of alleged frauds including a $600 million scheme involving the Himalaya Exchange and two cryptocurrencies, Guo's purchases included not just mansions, yachts and Ferraris, but also a pair of $36,000 mattresses, a $62,000 television, and a $53,000 fireplace log cradle holder.

On Wednesday morning, Guo was arrested, according to Damian Williams, the U.S. Attorney for the Southern District of New York. Williams' office seized $634 million from 21 bank accounts over the past six months, as well as assets purchased with the allegedly ill-gotten gains, including a Lamborghini.

Accusing Guo of "lining his pockets with the money he stole," Williams said he "led a complex conspiracy to defraud thousands of his online followers out of over $1 billion dollars."

"Guo Wengui" was actually one of five aliases of Ho Wan Kwok, Williams' office said. The 12 charges against him include seven counts of fraud, as well as conspiracy, money laundering and obstruction of justice.

An alleged partner, William Je, was also indicted and is being sought by authorities.

In a statement, Je said he was deeply disappointed to learn of the actions by the DoJ and SEC — and that he vehemently denies the allegations.

The Securities and Exchange Commission simultaneously filed suit against the pair, alleging an $850 million fraud scheme.

"We allege that Guo was a serial fraudster, who raised more than $850 million by promising investors outsized returns on purported crypto, technology and luxury good investment opportunities," said Gurbir Grewal, director of the SEC's Division of Enforcement. He said:

"In reality, Guo took advantage of the hype and allure surrounding crypto and other investments to victimize thousands and fund his and his family's lavish lifestyle."

Himalaya Crypto Scheme

Among the alleged frauds was the Himalaya Exchange, "a purported cryptocurrency 'ecosystem' … [that] included a purported stablecoin called the Himalaya Dollar ('HDO' or 'H Dollar') and a trading coin called Himalaya Coin ('HCN' or 'H Coin')," Williams' office said.

The HCN and HDO initial coin offering was on Nov. 1, with HCN trading at $0.10. The exchange claimed its price rose to $27 within two weeks, according to the indictment.

The exchange scheme ran from April 2021 to this month, the indictment said. The H Coin was backed 20% by gold that could be sold "if the H Coin is worthless," Guo said. He promised:

"If anyone loses money, I can say I will compensate 100%. Whoever loses money, I will bear it."

However, the two coins were only tradable on the Himalaya Exchange and HCN "could not be traded for, or converted into, other currencies."

The two coins' whitepapers even said in the fine print that "contrary to [Guo's] representations," neither was a cryptocurrency but rather traded using "credits."

Those credits could "only be used on the Himalaya Exchange or within the "Himalaya ecosystem" and "did not carry any right to require their exchange for fiat currency or cryptoassets," the indictment said.

Among other things, Himalaya Exchange funds were loaned to Guo to buy a $37 million yacht.

Authorities seized $335 million in Himalaya funds on Sept. 20 and 21, and $278 million from bank accounts held in the names of Himalaya exchange entities over the next month or so.

Three More Enterprises

The U.S. Attorney also alleged that Guo obtained $250 million from G|Clubs, an online membership organization for the wealthy that allegedly called itself "a gateway to carefully curated world-class products, services and experiences."

There was also GTV Media Group, which "was touted as a wide-ranging media company." Guo sold about $452 million in stock in a private placement sale to some 5,500 investors.

Those investors were subsequently sold investments in a collection of informal investment groups called "Farms" that were purported to be part of the Himalaya Farm Alliance. It made loans to GTV that would be convertible into GTV stock at $1 for one share.

Bloomberg noted that Bannon and Guo were reported to be "two of the main people behind GTV" although it added that "no wrongdoing is alleged against Bannon."

In 2020, Bannon was arrested on Guo's yacht and charged with siphoning money from the "We Build the Wall" fund — collected to build a wall between the U.S. and Mexico — before receiving a presidential pardon on Trump's last day in office, it added.

But Bannon is still facing charges related to that alleged incident in New York.

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