In a historic case, Randall Crater was convicted of wire fraud in a $7.5 million scheme to peddle a fake payments token he said was gold-backed and working with Mastercard.
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The operator of a 2014 cryptocurrency scam who fraudulently claimed to have created a gold-backed virtual payments token has been sentenced to 100 months in federal prison.
Randall Crater was convicted of multiple counts of wire fraud and several other charges related to unlicensed money transmitting after raising more than $7.5 million for My Big Coin, a fake cryptocurrency that was purportedly backed by gold and supported by a partnership with Mastercard. It ran from 2014 to 2017.
Beyond the criminal charges, the case was a milestone that marked the first time a court ruled that cryptocurrencies were commodities.
My Big Scam
Crater "saw the growing crypto marketplace as an opportunity to create the illusion of My Big Coin as a legitimate service from which investors would yield a profit," said Rachael Rollins, the United States Attorney for the District of Massachusetts. She added:
"His lies and deception inflicted real trauma, pain and hardship on the lives of 55 individual victims and their families who funneled their money into bank accounts Mr. Crater controlled and used to finance his extravagant lifestyle."
That included a house and cars, and more than $1 million in jewelry, art and antiques, they said.
"The excitement of being part of a new market in cryptocurrency can be very enticing to those who want to be in at the forefront; but in this case they found their investment was nothing more than an investment in Mr. Crater's lavish lifestyle," said Eric Shen, head of the U.S. Postal Service's Criminal Investigations Group. He added:
"Consumers [should] thoroughly investigate all offers and don't rely on what they're told, even if they believe there is protection in their investments and deposits through the name recognition of an alleged renowned partner."
Which is to say, do your own research, a mantra repeated often by experienced crypto investors.
A civil suit brought by the Commodity Futures Trading Commission (CFTC) in 2018 was put on hold pending the outcome of the criminal trial.
Nonetheless, that filing was an important milestone in regulation of the cryptocurrency industry, as the judge hearing the case ruled for the first time that the CFTC did have "the power to prosecute fraud involving virtual currency," the agency said at the time. It said:
"The court held that the CFTC had sufficiently alleged that the particular virtual currency at issue, My Big Coin (MBC), was a commodity under the Commodity Exchange Act because the CFTC alleged that MBC 'is a virtual currency and it is undisputed that there is futures trading in virtual currencies (specifically involving Bitcoin).'"
