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Cryptocurrency Trader Charged With Fraudulent Scheme Involving Over $5 Million

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Press Release
Published on:
Jan/27/2021

AUDREY STRAUSS, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a Complaint in Manhattan federal court charging JEREMY SPENCE, a/k/a “Coin Signals,” a cryptocurrency trader who solicited funds for various cryptocurrency funds that he operated, with commodities fraud and wire fraud offenses.  As alleged, SPENCE took cryptocurrency worth over $5 million from more than 170 individual investors after making false representations in connection with these cryptocurrency funds. SPENCE was arrested this morning in Rhode Island and will be presented later today before Magistrate Judge Patricia A. Sullivan in the U.S. District Court for the District of Rhode Island.

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Manhattan U.S. Attorney Audrey Strauss said:  “Jeremy Spence, a/k/a, ‘Coin Signals,’ allegedly lured investors  to his cryptocurrency investment scam by touting returns of up to 148%.  Spence’s investments not only failed to reach his audacious claims, they consistently lost money, leaving a $5 million void in his clients’ crypto accounts. Spence’s alleged conduct should strongly signal would-be investors to thoroughly educate themselves in the cryptocurrency ecosystem before falling prey to investment scams promising huge returns for small investments that are indeed too good to be true.”

FBI Assistant Director-in-Charge Sweeney said:  “As alleged, Jeremy Spence misrepresented the success of his investment platform in order to entice people to send money his way. Because his trading was less than profitable and significantly less successful than he represented to investors, he used money from new investors to pay off others in order to keep his plan moving—a  typical marker of a Ponzi scheme. Whether investing with cash, shares, or virtual currency, our advice to investors always remains the same—exercise due diligence, and when something just doesn’t seem right, report suspicious activity to the authorities.”

As alleged in the Complaint unsealed today in Manhattan federal court:[1]

From November 2017 through April 2019, SPENCE solicited investors in various cryptocurrency investment pools that SPENCE had created and managed (the “Funds”). SPENCE solicited investments for several Funds, the largest and most active of which were the Coin Signals Bitmex Fund, a/k/a the “CS Mex Fund,” the Coin Signals Alternative Fund, a/k/a the “CS Alt Fund,” and the Coin Signals Long Term Fund. Investors who wanted to participate in a Fund would transfer cryptocurrency, such as Bitcoin and Ethereum, to SPENCE in order for SPENCE to invest it. 

SPENCE solicited these investments through false representations, including that SPENCE’s crypto trading had been extremely profitable when, in fact, SPENCE’s trading had been consistently unprofitable.  For example, on January 28, 2018, SPENCE posted a message in an online chat group falsely claiming that his trading of investor funds over the past month had generated a return of more than 148%. As a result of this misrepresentation, investors transferred additional funds to SPENCE. In fact, over that same period of approximately one month, SPENCE’s trading resulted in net losses in the accounts in which he traded investor funds.

To forestall redemptions by investors, and to continue to raise money from investors to fund his scheme, SPENCE generated fictitious account balances, which he made available to investors online. Instead of accurately reporting the trading losses SPENCE was incurring, the account balances falsely indicated to investors that they were making money by investing with SPENCE. To hide his trading losses, SPENCE used new investor funds to pay back other investors in a Ponzi-like fashion. In total, SPENCE distributed cryptocurrency worth approximately $2 million to investors substantially from funds previously deposited by other investors.

SPENCE, 24, of Bristol, Rhode Island, is charged with one count of commodities fraud, which carries a maximum sentence of 10 years in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Ms. Strauss praised the investigative work of the Federal Bureau of Investigation and also thanked the Commodity Futures Trading Commission for its assistance. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Christine Magdo is in charge of the prosecution. 

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