Gemcoin Founder Admits to Fraud in $147 Million Scheme

The 62-year-old Southern California resident agreed that he and other co-conspirators fraudulently promoted a cryptocurrency called Gemcoin (or Gem Coins) that helped fleece $147 million from 70,000 victims.

Steve Chen, the mastermind behind the $147 million Gemcoin cryptocurrency scheme, has admitted to wire fraud and tax evasion in a plea agreement.

Chen, also known as “Boss”, reported an income of $138,000 in 2014 which is a far cry from the $4.8 million he now admits to pocketing that year. Chen used the proceeds to buy homes and pay for a gambling habit, authorities said.

Virtual Coins Backed By Nothing

Between July 2013 and September 2015, Chen ran a multi level marketing scheme to promote U.S. Fine Investment Arts, Inc. (USFIA) which rewarded investors first with points, and then with Gemcoins.

These virtual coins were supposedly backed by gems mined by the company and could be traded on the USFIA platform.

While the value of the coins supposedly increased based on the company’s gemstone sales, in reality, the USFIA did not own or operate any gemstone mines. Instead, USFIA bought gemstones from commercial suppliers and assigned grossly inflated prices.

U.S. Attorney Nick Hanna said in a statement:

“Mr. Chen’s promises to investors were as worthless as his non-existent mines and phony digital currency. This case should remind all investors that trappings of success may convey legitimacy, but everyone should exercise extreme care when considering giving hard-earned money to any outfit promoting trendy products and extravagant profits.”

Chen Will Compensate Victims

Chen has agreed to pay back $1,885,094 in back taxes for 2014 as well as pay a civil fraud penalty and interest.

He’s facing a sentence of 10 years in prison, a fine of at least $500,000, and he’s required to pay «full restitution» to all the victims.

Gemini Joins Silvergate Exchange Network for 24/7 Fiat Money Transfers

Gemini, the cryptocurrency exchange founded by the Winklevoss twins, is joining crypto-friendly bank Silvergate’s Silvergate Exchange Network (SEN) to speed fiat transfers.

Real-time fiat money transfers

Gemini announced the move in an official blog post on Aug. 27. According to the announcement, the main benefit of the exchange’s partnership with Silvergate is that Gemini’s institutional investor clients can withdraw and deposit United States dollars from their accounts at any time. This is already the industry standard for cryptocurrencies, but not for fiat money, per the report.

Additionally, the announcement states that Gemini is integrated into SEN’s application programming interface (API). Integrating with SEN’s API reportedly enables Gemini to process their customers’ deposit and withdrawal requests automatically, in real time.

Silvergate’s growth in Q4 2018

According to a filing with the U.S. Securities and Exchange Commission (SEC), Silvergate gained almost 60 new crypto customers in the last quarter of 2018. Per the filing, Silvergate served 542 clients involved in digital currency, whereas it reported 483 to the SEC in September 2018.

In the more recent filing, Silvergate summarized the scale of the crypto market. The bank wrote:

“Over $8.3 billion has been invested in digital currency-related projects, excluding initial coin offering funding, since December 31, 2013. Approximately $1.3 billion in venture funding was raised in the digital currency and blockchain market in the 12 months ended June 30, 2018, which is the most recent date such information is available.”

Gemini’s expansion into Australia

As previously reported by Cointelegraph, Gemini announced last week that it is expanding into Australia. Its cryptocurrency exchange and custodial services will be available for Australian residents via mobile apps on iOS and Android.

Leave a Reply

Your email address will not be published. Required fields are marked *