Bitcoiin insider and top promoter John DeMarr has been arrested ‘for his alleged participation in a coordinated cryptocurrency and securities fraud scheme’.
DeMarr’s indictment details one charge of conspiracy to commit securities fraud.
The DOJ’s complaint against DeMarr groups Bitcoiin and Start Options together as one fraudulent scheme.
Bitcoiin had previously done business under different corporate names, including the name “Start Options” in or about the fall of 2017.
DeMarr’s official BitCoiin title was Director of North American Operations.
As detailed in our coverage of the SEC’s lawsuit against DeMarr, his primary role within Bitcoiin was to “attract US investors”.
Both Start Options and Bitcoiin represented external revenue was generated via mining and trading – which was baloney.
BehindMLM reviewed Start Options in September 2017. Based on its business model, we identified it as a Ponzi scheme.
BehindMLM’s Start Options review is referenced in the DOJ’s complaint as an uncredited “blog post”.
The defendant JOHN DEMARR was alerted as early as December 2017 that Start Options was not a legitimate business.
On or about December 18, 2017, a Start Options promoter sent DEMARR an email that copied portions of a blog post written by a Start Options investor entitled “UPDATE ON THE STARTOPTIONS.COM SCAM!”
The blog post described, in sum and substance, how Start Options was not operating out of its purported address in the Philippines and was “not a real business.”
Later that day, DEMARR forwarded the email to Individual-1 and wrote, “See below- we need to fix this or this guy will hurt us! Call me.”
“Individual-1” is Start Options and Bitcoiin owner, Kristijan Krstic.
Despite BehindMLM’s published research, investors dumped millions into Start Options and Bitcoiin.
In or about approximately December 2017, Start Options began receiving substantial Bitcoin inflows from investors to a digital wallet controlled by Individual-1.
In or about and between December 1, 2017 and January 26, 2018, investors sent approximately $2.9 million worth of Bitcoin and another cryptocurrency to that digital wallet and to an account controlled by Individual-1 at a cryptocurrency exchange.
Investors, the majority of whom were based in the United States (including ones located in the Eastern District of New York), also sent approximately $1.3 million in U.S. dollars to a bank account controlled by the defendant JOHN DEMARR in the United States during the same period.
Beginning in or about January 2018, investors in Start Options had difficulty accessing the personal account page as well as redeeming their Start Options investments.
When there were issues with investors’ accounts, the defendant JOHN DEMARR would forward investors’ emails to Individual-1 or “Sasha Bjelov.”
Sasha Bjelov was a pseudonym used by one of Kristijan Krstic’s accomplices.
Start Options investors were not permitted to withdraw money and were instead forced to roll over their accounts into an unregistered “initial coin offering” of B2G tokens to be issued by Bitcoiin2Gen.
Start Options investors who tried to decline the “opportunity” were unable to cash in their shares, which were rolled into B2G accounts.
In or about February 2018, Bitcoiin conducted an ICO of B2G, which was open to the general public and allowed investors to purchase B2G tokens.
Investors were told that they could purchase B2G tokens using U.S. dollars, Euros, Bitcoins or other cryptocurrencies, and that they could earn commissions by recruiting others to purchase B2G tokens.
As with Start Options, investors sent money to the defendant JOHN DEMARR to purchase B2G tokens.
Investors in the B2G ICO never actually received any digital tokens and funds from the offering were not used to develop the B2G platform.
Instead, investors received fabricated account statements that falsely represented that their money had been invested in B2G tokens and that their investments were earning enormous returns.
In reality, virtually all of the proceeds of the B2G ICO were used to make payments to the principals of Bitcoiin, including the defendant JOHN DEMARR.
Bitcoiin collapsed in March 2018.
In or about late March 2018, Bitcoiin announced that it was becoming “truly open source” and would become a “genuinely anonymous cryptocurrency with no individual or individuals having control over the entity.”
As a result, the company announced that the founders, including Individual-1, and the Celebrity Spokesperson were exiting the company.
Following that announcement, many investors sought to withdraw their investments from B2G, but they were either discouraged or prevented from doing so by the defendant JOHN DEMARR.
To discourage investors from withdrawing their funds, DEMARR and others sent investors e-mails with purported reasons to delay the withdrawals, such as technical difficulties with the websites. Investors who persisted in seeking to withdraw funds were either told that their requests were denied, or never received their funds.
Similarly, investors who tried to recover their promised commissions from B2G mining referrals were denied commissions or told there would be no commissions.
Over the following months, Kristijan Krstic and John DeMarr initiated their respective exit-scams.
In or about late April 2018, Individual-1 disappeared with approximately $7 million in investor funds from the sale of B2G and Start Options that Individual-1 had received through the defendant JOHN DEMARR.
At that time, Individual1 stopped responding to all communications.
Despite the fact that DEMARR knew that Individual-1 had left with investor funds and that Bitcoiin was collapsing, DEMARR never informed investors of this information and instead falsely insisted to investors that B2G tokens would soon be listed on major digital asset platforms.
In or about May 2018, the defendant JOHN DEMARR began collecting B2G tokens from disgruntled investors to allegedly conduct a “bulk sale,” which DEMARR claimed was a way to get money back from the B2G principals, including Individual-1, within several days.
Investors began transferring B2G tokens they thought they owned to DEMARR, with the expectation that DEMARR would return their original investment funds shortly.
When the investors never received their funds, the investors began to demand payment from DEMARR, who told the investors that the “bulk sale” of B2G tokens could not take place until the end of the month.
In or about late May 2018, the defendant JOHN DEMARR told some B2G investors that DEMARR was flying to Hong Kong to conduct the “bulk sale.”
Instead, DEMARR flew to Podgorica, Montenegro, where he understood Individual-1, “Sasha Bjelov” and other individuals working with Individual-1 were located.
Rather than face the disgruntled B2G investors, the defendant JOHN DEMARR staged his own disappearance and communicated the fake disappearance to B2G’s investors.
Since his alleged disappearance, the defendant JOHN DEMARR has resided, at least in part, in California.
DEMARR used investor funds from Start Options and B2G to purchase, among other things, jewelry and luxury vehicles such as a Porsche, and to remodel his home in California.
B2G investors were ultimately told … that the account with the B2G tokens had been zeroed out and that the funds had been lost.
To date, known victims have reported losses that total over $4 million.
The DOJ’s complaint against DeMarr was filed under seal on January 29th. Investigating authorities believed DeMarr was a flight risk.
Based on the unsealing of the case against him, DeMarr is believed to have been arrested sometime between the 29th and February 1st.
DeMarr’s case was the result of a joint investigation by the DOJ (New York), FBI, IRS and SEC.
As at the time of publication DeMarr’s case hasn’t appeared on Pacer yet. I imagine it’ll be updated over the next few days, after which I’ll add it to our list of tracked cases.
Kristijan Krstic was arrested by Serbian authorities in October 2020. He is believed to have since been extradited to the US.
Although I can’t confirm it at present, one can safely assume a criminal case against Krstic has been filed under seal or is pending.
Update 4th February 2021 – Can confirm there’s no unsealed case against Krstic at the time of this update.
Krstic is a defendant in the SEC’s case but his status remains unknown for now.
Update 5th February 2021 – As per the SEC’s complaint regarding Krstic;
Upon information and belief, he is currently in custody in Serbia.
Presumably there’ll be an extradition at some point. For now that seems to still be working its way through the Serbian courts.
Update 18th February 2021 – DeMarr’s criminal case has been continued to March 3rd due to ongoing plea negotiations.
DeMarr’s $100,000 bond appears to have been posted and, if I’m reading the case documents correctly, he’s been released with travel restricted to California and NY.
Update 3rd August 2021 – DeMarr has plead guilty to one count of conspiracy to commit securities fraud.
He is scheduled to be sentenced on January 4th, 2022.