NEW YORK — An ex-investment banker of Deutsche Bank faced charges for committing a cryptocurrency fraud that resembled a Ponzi scheme.
He made false promises to investors of assured returns and utilized a portion of their funds to compensate other investors.
US prosecutors have arrested and charged Rashawn Russell, 27, for duping several investors by falsely claiming to use their funds for crypto investments.
In reality, Russell was found to be using the money for his personal expenses such as gambling, or to sustain the purported scheme.
According to a statement made by US attorney Breon Peace on Tuesday, Russell exploited the demand for cryptocurrency investments to defraud numerous investors and finance his lifestyle. The US attorney’s office in Brooklyn, New York, will continue to pursue fraudsters perpetrating such schemes in the digital asset markets.
Russell has been charged with wire fraud and could face a maximum sentence of 20 years in prison if found guilty, Peace added.
This case is among the recent government efforts to clamp down on cryptocurrency fraud.
In February, Eddy Alexandre of Valley Stream, New York, pleaded guilty to running a commodities fraud scheme through his EminiFX cryptocurrency and foreign exchange platform, deceiving investors by providing false information about their investments and swindling hundreds of millions of dollars.
Former investment banking associate Rashawn Russell, who claimed to be a licensed broker, is accused by prosecutors of misusing investors’ funds for his personal benefit.
He allegedly employed a typical Ponzi scheme tactic of using the money received from some investors to pay back others, failing to deliver on the promised returns.
To keep his clients deceived, Russell reportedly falsified documents, such as a bank balance screenshot showing around $355,000, which was actually just $35,000.
During his arraignment on Tuesday, Russell pleaded not guilty through his attorney and was released on a $200,000 bond, with his parents as signatories.
He has been ordered to return to court on May 9, and there are plea negotiations ongoing with the US that might avoid the need for a trial.
US Magistrate Judge Ramon Reyes warned Russell against contacting investors and others involved in the case to avoid losing his freedom on bail.
He was also directed to surrender his passports. Russell, who is originally from Jamaica and is now a naturalized US citizen, declined to comment on the charges.
Deutsche Bank said it cooperates with law enforcement.
“The bank regularly supports law enforcement and regulatory oversight efforts, including appropriately responding to and cooperating with authorized investigations and proceedings,” spokesman Dylan Riddle said in a statement.
According to prosecutors, Rashawn Russell, who was employed at a bank between 2018 and 2021, convinced friends, former classmates, and former colleagues to invest with him. He claimed to have developed a profitable trading strategy for altcoins (digital currencies other than Bitcoin) and reportedly delivered returns exceeding 100% to his clients within three months.
In an effort to lure more investors, Russell guaranteed them a fixed return of up to 25% after three months, as per prosecutors. As part of the alleged scheme, he is accused of misleading his clients about their investments’ status.
When one investor requested a refund, Russell purportedly sent a fabricated bank wire transfer confirmation in place of the money, according to prosecutors.
The case, US v. Rashawn Russell, 23-cr-152, is being heard in the US District Court, Eastern District of New York (Brooklyn).