Crypto scam targets law personnel; SEC charges accused
- The officer faced charges of allegedly orchestrating fraudulent crypto schemes and misleading investors.
- The accused allegedly incurred substantial losses and misappropriated a significant portion of the funds.
Former New Jersey State Correctional Police Officer John A. DeSalvo is facing charges from the Securities and Exchange Commission (SEC) for allegedly orchestrating a fraudulent scheme involving the Blazar Token, a crypto asset security he created.
The regulator has accused DeSalvo of raising approximately $620,000 through an unregistered offering of the Blazar Token. The token eventually collapsed in May 2022.
The complaint alleged that DeSalvo falsely claimed the Blazar Token was registered with the SEC, thereby misleading investors. He is also said to have misappropriated investor funds, some of which were used for personal purposes, including a bathroom renovation.
According to the SEC’s complaint, DeSalvo launched the Blazar Token in November 2021, targeting law enforcement personnel and first responders with promises of extraordinary returns. He made false claims about the token’s potential to replace traditional pension systems.
Officer orchestrated fraudulent schemes and misled investors, claims SEC
Authorities accused DeSalvo of primarily using social media to solicit investors for a separate investment venture. This included stocks, options, and crypto asset securities. He reportedly raised $95,000 from 17 investors and claimed to invest the funds on their behalf.
However, within weeks of depositing the funds into his brokerage account, DeSalvo allegedly incurred substantial losses. He also misappropriated a significant portion of the funds.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, emphasized the targeting of law enforcement personnel and the misuse of investor funds. He noted that DeSalvo’s actions were particularly reprehensible due to his exploitation of fellow law enforcement personnel’s trust and investment.
David Hirsch, Chief of the Crypto Assets and Cyber Unit in the SEC’s Division of Enforcement, highlighted the need for registration and oversight in the cryptocurrency space. He noted that promoters often present familiar frauds in new forms within the crypto realm, making it challenging for investors to independently verify claims.
Hirsch emphasized that registering securities offerings ensures better oversight and transparency for investors. He also added the SEC will continue to enforce registration requirements.
The complaint against DeSalvo has been filed in the U.S. District Court for the District of New Jersey. It charged him with violations of securities laws, including antifraud and offering registration provisions. The SEC also sought remedies including injunctive relief, disgorgement with prejudgment interest, and civil penalties.
In a parallel development, the U.S. Attorney’s Office for the District of New Jersey has also brought criminal charges against DeSalvo. The combined actions reflect regulatory agencies’ commitment to holding individuals accountable for fraudulent activities in the cryptocurrency space and ensuring investor protection.