The U.S. Securities and Exchange Commission (SEC) filed charges against John DeSalvo, the creator of a minor cryptocurrency called Blazar Token, on Aug. 23.
The agency said that DeSalvo created Blazar Token in 2021 and raised $620,000 from 220 investors before the token ultimately collapsed in May 2022.
DeSalvo once worked as a State Correctional Police Officer in New Jersey, a fact that was key to his scheme. He allegedly touted Blazar Token as a replacement for existing state pension systems and said his token could be purchased through automatic payroll deductions. He targeted law enforcement and first responders as potential buyers and gained their trust through his status as a former corrections officer.
The SEC also alleged that DeSalvo guaranteed extraordinary returns on investments and falsely claimed that the Blazar Token was properly registered.
The scheme ultimately saw DeSalvo misappropriate and misuse investor funds. The SEC said that DeSalvo sent misappropriated funds to his own cryptocurrency wallet and also used the funds to pay for a bathroom renovation.
DeSalvo faces numerous charges
The SEC added that DeSalvo conducted an earlier, unrelated scheme in January 2021. There, he targeted investors via social media and promised to invest their funds in stocks, options, and crypto asset securities. He allegedly lost nearly $17,000 of the $95,000 he raised, then misappropriated the remaining $78,000. He falsely claimed that the securities had lost all value as the result of poor market conditions.
DeSalvo has now been charged with violating the antifraud and offering registration provisions of the relevant securities laws. The SEC seeks injunctive relief, disgorgement, prejudgment interest, and civil penalties through its action.
In a parallel action, the U.S. Attorney’s Office for the District of New Jersey — an office that is part of the U.S. Department of Justice (DOJ) — also announced criminal charges against DeSalvo for both schemes. Those charges include two counts of wire fraud, two counts of securities fraud, and two counts of money laundering.
The charges against DeSalvo are added to a long and growing list of projects, companies, and individuals that U.S. authorities have cracked down on in recent years.
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