Written by staff writer.
An Australian national is facing charges in the United States after allegedly operating a fraudulent scheme that saw people invest USD25 million in various trading programs on the promise of high yields.
David Gilbert Saffron, 51, along with US national Vincent Anthony Mazzotta Jr., 52, were arrested last year. However, the US Department of Justice only unsealed the indictment this week. The department alleges the duo falsely said they would use artificial intelligence automated trading bots to trade victims’ investments in cryptocurrency markets.
Saffron and Mazzotta’s charges include conspiracy to commit wire fraud, wire fraud, conspiracy to obstruct justice, conspiracy to commit money laundering, and money laundering. The charges coincide with the DOJ and other US agencies taking an increasingly hardline stance on cryptocurrency exchanges and regulatory compliance.
The DOJ says the pair promoted fake investment programs under names including Circle Society, Bitcoin Wealth Management, Omicron Trust, Mind Capital, and Cloud9Capital.
Gilbert formerly resided in Sydney’s eastern suburbs. Open-source data suggests his business activities in Australia ceased over ten years ago. However, further searches reveal his business activities came to the attention of US investors in 2014. Two years ago, a Nevada District Court entered a default USD32 million judgment against Gilbert and the Circle Society entity controlled by him over a cryptocurrency fraud and misappropriation scheme. That judgement resulted from action brought by the Commodity Futures Trading Commission (CFTC) in 2019.
In the current matter, Saffron and Mazzotta told investors their cryptocurrency trading bot could execute over 17,000 transactions per hour on various cryptocurrency exchanges and generate 500 – 600% returns. Conforming to the classic Ponzi model, the pair used some of the money raised from new investors to pay former investors but diverted most to fund lifestyle expenses.
Regulators in various jurisdictions have struggled to keep pace with the crypto industry. However, several high-profile crypto exchange failures, including Binance and FTX, have increased pressure on authorities to curb wayward behaviour among players in the sector. Among others, the CFTC investigates and prosecutes violations of the Commodities Exchange Act, including individuals and entities who improperly operate digital asset exchange platforms.
The DOJ also alleges Saffron and Mazzotta also conspired to conceal the source and location of victims’ cryptocurrency investments through various means, including using methods known as blockchain hopping and through services known as mixers or tumblers that are designed to prevent cryptocurrency tracing.
Saffron has a history of using various aliases to run cryptocurrency scams. However, in more recent years, out-of-pocket investors have tracked his activities and sought to reveal his new trading identities as they were uncovered.
In 2023, various bills have been introduced in Washington to crack down on the misuse of digital currencies. A recent bill introduced by Senator Elizabeth Warren, which has the support of the US banking industry and other stakeholders, targets fraudsters and other threat actors in the crypto space. The Senator says the bill attempts to close “loopholes and bring the digital asset ecosystem into greater compliance.”
Saffron remains in pre-trial custody in Los Angeles.
