Two US government agencies are taking action against the founder of a cryptocurrency project alleged to pull off an exit scam and tax evasion while spending the profits on a luxury lifestyle.
According to an indictment filed in the United States Southern District Court in New York and unsealed Wednesday, the Internal Revenue Service (IRS) has accused Amir Bruno Elmaani, aka “Bruno Brock,” on two counts of tax evasion .
Elmaani, who created a blockchain protocol called Oyster Pearl, is alleged to have made “millions of dollars” from offering an initial coin of her pearl cryptocurrency (PRL) in 2017. Those tokens were allegedly used for purchase online data storage. that fueled the Oyster protocol.
Instead of reporting the income earned from the sales to the IRS, Elmaani allegedly falsified her 2017 tax return and failed to file one in 2018, pocketing the millions instead.
“As it happens, Elmaani was funding the proceeds of its alleged cryptocurrency scheme through a shell company that concealed the true nature of its financial interests,” said William Sweeney Jr., assistant director of the FBI, in a statement from the Justice Department.
According to the indictment, Elmaani used $ 10 million in profits to buy multiple yachts (where he stored gold bars), real estate and home renovations, as well as spend $ 1.6 million in a carbon-fiber composite company.
The maximum penalty of a criminal charge for evading tax carries a maximum of five years per count, meaning Elmaani could be facing up to 10 years in federal prison.
Meanwhile, the Securities and Exchange Commission (SEC) filed a separate civil case against Elmaani on Wednesday.
It is responsible for maintaining the offer of illegal guarantees of PRL tickets and benefiting from “freeing millions of unauthorized tickets for itself at no cost and selling them to the secondary market, thereby causing other ticket prices to plummet.”
The exit scam
Starting October 2018, Elmaani – operating under her pseudonym Bruno Brock – took advantage of a smart contract on the Ethereum blockchain to create new tickets for sale at below-market prices before creating new ones for free.
At the time, Elmaani said he kept millions of PRL in line with his “founders share” and in the process claimed he had to move his PRL tokens to a different wallet to avoid double taxation, per DOJ indictment.
By inflating the stable supply of PRL through its access to the protocol, Elmaani claims to have been able to convert its newly minted PRL tokens to other cryptocurrencies using a “foreign exchange.” After discovering the alleged foul play, the exchange ended trading for PRL that left investors holding essentially bags of worthless tickets.
The SEC said, “Elmaani made approximately $ 570,000 in illicit proceeds from coinage and sale of Pearl tokens and, as a result of its sales, reduced Pearl’s ticket price by nearly 65%, resulting in significant losses for investors.”
See also: Over 13% of Bitcoin Crime Profits Launched Through ‘Privacy Wallets’: Elliptic
Elmaani used a coin mixer – a service designed to hide the true origin or destination of cryptocurrencies on a specific blockchain – before handing over money to family members and friends, after which he transferred them to his own accounts, according to DOJ.
“The basic plan was outdated fraud and tax evasion,” said Audrey Strauss, a Manhattan US acting attorney. “Thanks to the FBI and IRS Criminal Investigation Division, Elmaani is now in custody and facing federal prosecution.”