Kristijan Krstic and his Ponzi empire accomplices have been sued by the SEC.
The civil lawsuit follows Krstic’s arrest in Serbia late final 12 months.
As alleged by the SEC, Krstic (aka Felix Logan) was assisted by John DeMarr and Robin Enos.
Kristijan Krstic is a Serbian-Australian nationwide. He ran his Ponzi empire from the Philippines earlier than fleeing to Serbia the place he was caught.
Krstic arrived within the Philippines after fleeing Australia, to flee expenses associated to his Choices Rider Ponzi scheme.
John DeMarr is a Californian resident and former non-public detective. He was inserted because the grasp distributor for Krstic’s varied Ponzi schemes.
Robin Enos can be a Californian resident and former legal professional. He misplaced his license to apply in 2011 following disciplinary expenses.
Enos continued to apply unlicensed and was sanctioned and fined after a shopper misplaced cash in an organization Enos illegally served as common counsel for.
Collectively Krstic and his accomplices operated and promoted Begin Choices and Bitcoiin2Gen.
The SEC has recognized all three schemes as unregistered securities choices.
Begin Choices and Bitcoiin2Gen in actual fact served principally as automobiles for Defendants DeMarr and Krstic to misappropriate investor funds.
By the point their schemes collapsed, that they had fraudulently raised, straight or via associates and promoters, no less than $11.4 million from greater than 460 traders in Begin Choices and Bitcoiin2Gen, none of which has been returned to traders.
BehindMLM reviewed Begin Choices and Bitcoiin in December 2017 and February 2018 respectively.
A part of Bitcoiin was Dragon Mining Tech, which Krstic used to spawn off a number of Ponzi schemes; Crypto Mining House, Palilula Mining, BTC Dealer On-line, BTC Mining Manufacturing unit and Coin Pool Mining.
BehindMLM appropriately recognized every of Krstic’s scams as Ponzi schemes.
From roughly December 2017 via late January 2018, Krstic (utilizing a pretend title) and DeMarr touted Begin Choices’ purported digital asset mining and buying and selling platform, which they falsely claimed was “the most important Bitcoin trade in euro quantity and liquidity” and “persistently rated one of the best and most safe Bitcoin trade by unbiased information media.”
Then, from late January 2018 via Could 2018, Krstic and DeMarr started selling Bitcoiin2Gen and the sale of its so-called B2G tokens, as a part of an unlawful unregistered and purported preliminary coin providing (“ICO”).
Throughout this era, they ignored Begin Choices traders’ requests for redemption and required them to roll their investments into B2G tokens.
Enos drafted the fraudulent promotional supplies he knew DeMarr and Krstic have been disseminating to the investing public in reference to these choices.
Bitcoiin2Gen was a sham. Enos knowingly or recklessly drafted, and DeMarr and Krstic knowingly disseminated, fictitious technical white papers and pretend web sites to create the deceptive look that the B2G tokens have been real digital property that have been buying and selling on the Ethereum blockchain, once they knew or recklessly disregarded that they weren’t.
As with all MLM Ponzi schemes, the admins obtained nearly all of funds invested.
With respect to Krstic’s Ponzi empire, he stole $9 million. John DeMarr made off with $1.8 million.
Robin Enos was comparatively shafted, receiving solely $12,000 for his efforts.
Of their lawsuit towards Krstic, the SEC dates his scamming again to “no less than 2012”.
Since no less than 2012, Krstic and his prior on-line funding schemes have been the topic of public allegations of fraud within the U.S. and overseas.
In December 2012, for instance, Krstic was recognized on one web discussion board as being linked to the fraudulent on-line funding schemes “binaryoptionsexposed.com,” and on-line dealer “bankoptions.com.”
In 2013, the Ontario Securities Fee positioned Krstic’s firm, Krisworld Improvement Restricted, “doing enterprise as binary optionsexposed.com, option-world.com, bankoptions.com, and signaliforex.com” on its regulatory warning record.
In April 2015, the web publication “Behind MLM,” printed the primary of a number of articles suggesting that the web site “Choices Rider” was seemingly a fraudulent Ponzi scheme, and that the area, and the area title of the affiliated web site bancdeoptions.com, have been linked to Krstic and/or his firm, Krisworld, with a purported deal with in Hong Kong.
Equally, in August 2016, a liquidator in Australia publicly launched an in depth report alleging that Krstic was a shadow director of an organization that operated a $4.5 million unlicensed pyramid scheme.
Krstic’s scamming historical past and a number of run-ins with regulators is why he created the alias Felix Logan.
Krstic managed all features of Begin Choices, together with, amongst different issues, by:
(1) creating its web site;
(2) creating its advertising and marketing supplies;
(3) hiring the corporate’s promoters; and
(4) deciding how investor funds have been spent.
Based on a number of press releases that the corporate issued in February 2018, Krstic was recognized (by way of his “Felix Logan” pseudonym) as the corporate’s Chief Monetary Officer.
Within the fall of 2017, DeMarr and a enterprise affiliate (“Affiliate 1”) grew to become interested by buying and selling in and making the most of promoting digital property, comparable to Bitcoin (“BTC”).
In or about November 2017, Krstic, who was searching for U.S.-based promoters to generate investor curiosity in Begin Choices, was launched to DeMarr via a potential investor who had labored with DeMarr in different multi-level advertising and marketing schemes.
On or about November 17, 2017, DeMarr and Begin Choices entered into an settlement entitled “Begin Choices Grasp Affiliate Settlement for North America 2017” (the “Grasp Settlement”) pursuant to which DeMarr would assist to “promote and market the Begin Choices Platform” within the U.S. in trade for a “income share” based mostly on a pyramidal fee construction for every funding made by shoppers solicited by DeMarr.
In emails dated on or about November 22, 2017 to November 30, 2017, Krstic emailed DeMarr with particulars on how investments obtained by DeMarr from traders have been to be despatched to Krstic.
Particularly, Krstic supplied deposit particulars to a checking account positioned in Manila, Philippines, for investments made in U.S. {dollars}, in addition to a digital pockets deal with for investments made in digital property.
Krstic additionally conveyed to DeMarr the 2 e mail addresses he used, and assisted him in acquiring entry to the Begin Choices Web site.
Beginning in December 2017, DeMarr labored with Krstic to revamp the Begin Choices Web site to assist entice traders.
DeMarr additionally recruited Enos, whom he knew to be a disbarred legal professional, to assist him ghost-write Begin Choices promotional supplies, together with press releases and edits to the Begin Choices Web site.
In roughly December 2017, Begin Choices, Krstic, and DeMarr started providing and promoting funding contracts that they and their associates promoted via the Begin Choices Web site, social media, and press releases.
Through the Related Interval, DeMarr labored at Krstic’s path because the “grasp consultant for North America” to solicit U.S.-based traders to Begin Choices.
A February 9, 2018 Begin Choices press launch introduced a “new program with the newest cryptocurrency Bitcoiin2Gen (B2G)” and acknowledged: “Begin Choices CFO Mr. Felix Logan confirmed his optimistic curiosity in Bitcoiin2Gen, our entire crew working carefully to capitalize on this chance . . . to make Bitcoiin2Gen extra worthwhile for our traders” and by creating a brand new “B2G Mining Pool” the place “our projected earnings on this program needs to be 80-90%.”
Between December 1, 2017 and January 26, 2018 alone, traders despatched roughly $2.9 million price of BTC and ETH to the Begin Choices digital pockets Krstic managed in addition to an account opened on CoinPayments.web, a digital asset fee processing service.
No registration assertion was ever filed with the Fee nor was any registration assertion in impact, for any of those provides or gross sales of Begin Choices funding contracts, which have been securities.
In late January 2018, Krstic and DeMarr launched a second, associated scheme—an unregistered providing of B2G tokens performed via an ICO (the “B2G ICO”).
The B2G tokens have been to purportedly be issued as digital tokens on the Ethereum blockchain prematurely of Bitcoiin2Gen’s purported launch of a mineable, tradeable cryptocurrency.
Bitcoiin2Gen performed this ICO publicly from roughly January 27, 2018 via roughly March 26, 2018, however continued to solicit investments for the ICO via Could 31, 2018 (the “B2G ICO Interval”).
In whole, Bitcoiin2Gen obtained roughly $7.2 million from greater than 435 traders in the course of the B2G ICO Interval.
No registration assertion was ever filed with the Fee or in impact at any time for the B2G ICO, and no exemption from the federal securities legal guidelines’ registration necessities utilized.
The SEC’s lawsuit particulars communication between Krstic and DeMarr, who mentioned BehindMLM’s protection of their fraudulent exercise.
By e mail dated December 22, 2017, DeMarr additionally forwarded to Krstic a hyperlink to an article on the web website “scamponzi.com” … entitled “Begin Choices Overview: A crypto mining & buying and selling billion greenback firm?”
That article famous, amongst different issues: (1) that the corporate’s purported Philippines deal with was that of a residential condominium and (2) that traffic-ranking knowledge for the Begin Choices Web site solid “stable doubt” on Begin Choices’ claims in regards to the measurement of its purported buying and selling platform and that it was “one of many quickest rising Progressive Bitcoin Mining & Crypto Forex Buying and selling [sic].”
In an try and prop up their fraudulent scheme, Bitcoiin paid Steven Seagal to advertise B2G.
The SEC fined Seagal over $300,000 for misconduct in February 2020.
Krstic and DeMarr additionally had Enos put collectively a B2G token whitepaper. Enos put collectively a paper that was “lower and pasted parts of White Papers he discovered on the web”.
This fictitious white paper was materially deceptive to potential traders.
Enos and DeMarr have been conscious that Enos, with none direct data of the purported B2G platform, created the Technical White Paper just by reducing and pasting parts of different white papers for different digital property that he discovered on the web, as directed by DeMarr.
Additional, Demarr and Enos knew, or have been reckless in not figuring out, that this Bitcoiin2Gen white paper was, from a technical perspective, nonsensical, describing the B2G token and its performance in a approach that it couldn’t feasibly function.
Maybe the largest con Krstic pulled off was convincing individuals to speculate hundreds of thousands in B2G tokens. Tokens that by no means really existed.
Krstic and his associates created a token “sensible contract” referred to as Bitcoiin2Gen “B2G”—not a mineable cryptocurrency—on the Ethereum blockchain, however they by no means transferred these tokens to traders on the Ethereum blockchain.
As a substitute, Krstic and his associates created a fictitious on-line person interface for traders on the Bitcoiin2Gen web site.
When traders logged on, they considered what gave the impression to be purported B2G tokens. In actuality, they by no means held B2G tokens as a result of they didn’t exist.
This elaborate web site purporting to point out B2G tokens buying and selling was materially deceptive.
And as Defendants knew or recklessly disregarded, the purported tokens couldn’t, opposite to claims made within the B2G Advertising Supplies on B2G’s web site, be traded for fiat forex or reliable digital property as a result of they have been by no means really issued to traders on the Ethereum blockchain.
Krstic’s Ponzi empire started to unravel in March 2018. That month the New Jersey Bureau of Securities issued Bitcoiin with an emergency securities fraud stop and desist.
To forestall the NJBS’ motion from undermining the success of their fraudulent scheme, DeMarr requested Enos to draft a response to the NJBS order.
DeMarr requested one other affiliate, Lawyer 1, a lawyer who had no prior data of Bitcoiin2Gen or digital property, to permit this letter to be printed on his letterhead and beneath his title.
On March 8, 2018, Bitcoiin2Gen printed this letter on its web site, and issued a press launch asserting: “Our lawyer want to present the next data to refute the allegations made towards us.”
The press launch hooked up a letter from Bitcoiin2Gen’s purported legal professional to the NJBS, and supplied a authorized and factual argument as to why a B2G token was not a safety however as a substitute was a so-called “utility token.”
The response letter contained a number of materials misrepresentations, which Krstic, DeMarr, and Enos knew or recklessly disregarded have been false. The letter, for instance, claimed that:
(1) Lawyer 1 had been retained by Bitcoiin2Gen;
(2) Bitcoiin was domiciled in Hong Kong; and
(3) Bitcoiin2Gen “has constructed a buying and selling trade, the specific objective of which is to facilitate homeowners of its forex, and different cryptocurrencies, buying and selling fiat currencies backwards and forwards.”
Two weeks later the Tennessee Division of Commerce & Insurance coverage Securities Division issued a securities fraud investor alert.
The alert referenced the NJBS stop and desist order alleging the corporate promoted the sale of unregistered securities and cautioned traders that the “not one of the corporations, promoters, or investments associated to Bitcoiin are registered with the TDCI.”
DeMarr once more requested Enos to draft a response, which he despatched to DeMarr for evaluation, after which on to Krstic and his associates for publication.
On or about March 26, 2018, Bitcoiin2Gen printed one other press launch, attaching this letter response on Lawyer 1’s letterhead.
By the letter, Defendants once more knowingly or recklessly falsely conveyed that Lawyer 1 represented Bitcoiin2Gen, and that Bitcoiin2Gen was domiciled in Hong Kong, which Defendants knew or recklessly disregarded was false.
By April 2018 Bitcoiin traders started reporting withdrawal issues.
All through April 2018, nonetheless, Defendants continued their deception, whilst traders unsuccessfully tried to withdraw funds from Begin Choices and/or commerce B2G tokens (as Defendants had promised they may) and complained to DeMarr and Krstic’s associates that they have been unable to take action.
Begin Choices, Bitcoiin2Gen, and Defendants disregarded investor inquiries with terse responses.
For instance, an April 23, 2018 e mail from “Thorex Help” to an investor acknowledged that “[a]fter reviewing your account and your contract phrases with Begin Choices we’ve got come to a conclusion that sadly, you haven’t met the necessities for the withdrawal since you might be nonetheless within the 90 days’ timeframe within the ongoing program”—although the investor had already exceeded that holding interval.
DeMarr started discouraging his downstream promoters from instructing traders on learn how to withdraw funds.
On April 10, 2018, DeMarr emailed one of many promoters: “cease telling individuals to withdraw proper now.
The websites [Bitcoiin2Gen and Start Options] are being up to date for small bugs right here and there.
Folks want to attend one other week or so. You’re inflicting issues.”
On April 22, 2018, DeMarr emailed Krstic’s affiliate that he had obtained “100’s of emails” from traders complaining that they have been unable to withdraw from Thorex.
Krstic initiated his exit-scam in April 2018, by pretending to depart Begin Choices and Bitcoiin.
On April 27, 2018, Krstic used the deal with @felixlogan_cfo to tweet “the time has come for me to seek out new challenges and alternatives, subsequently I want to inform everybody that I’m not a part of Startoptions.”
That very same day, Krstic’s affiliate emailed DeMarr to advise him that the proprietor “has offered his share in Begin Choices and all his different shares in Dragon mining and all different ventures to do with crypto mining.”
DeMarr emailed Krstic’s “Felix Logan” e mail account with the topic “Your [sic] out!” and requested “[w]hy did you not inform me you have been promoting out. We had many agreements that weren’t accomplished.”
Krstic didn’t reply.
On April 28, 2018, a Begin Choices press launch declared that the corporate had been offered to Russian enterprise capitalists.
On or about Could 3, 2018, Enos emailed Affiliate 1: “Any information on the large money out? You and John flying to Europe?”
Affiliate 1 replied, “Sure, as I’m positive you’ve heard by now, [t]he entire factor simply blew up and its [sic] all John’s fault.”
At no time throughout this era did DeMarr alert traders that the undertaking had “blown up.”
On the contrary, he strove to take care of the phantasm that the corporate was nonetheless operational.
John DeMarr’s exit-scam noticed him invent an try on his life and fictitious maintain up.
The following day, Affiliate 1 emailed a colleague of DeMarr’s who was additionally a non-public investigator with the topic “Tried Homicide of John DeMarr.”
Affiliate 1 wrote that DeMarr had landed in Montenegro with “2,424 BTC Bit Coin with a worth of . . . 25 million US {dollars} in a non-public commerce trade that the corporate had arrange,” however that DeMarr had been bodily attacked in Montenegro by two Bitcoiin2Gen associates, and shortly thereafter “the account was zeroed out and the cash taken by the corporate.”
Fairly than face disgruntled traders upon his return to the U.S., DeMarr fabricated a narrative relating to his disappearance and enlisted Enos and Lawyer 1 to help.
Enos drafted a letter, the contents of which DeMarr dictated to Enos over the phone when he was already again in the US, and, on Could 30, 2018, Lawyer 1 despatched an e mail to B2G traders with the topic “John DeMarr” that hooked up that letter, on Lawyer 1’s letterhead.
The letter acknowledged as follows:
I’ve been employed by the Property of John De Marr and his Household to ship out this letter.
The motion of sending out this letter was ready on Could 14, 2018 “as a precaution earlier than John DeMarr’s journey to Montenegro . . . within the occasion of one thing going mistaken or one thing occurring to him abroad.
The worst has occurred. Presently John is lacking. All his communication units aren’t responding.
DO NOT e mail him. DO NOT name or textual content his cellphone as we have no idea who has these units.
The household has been involved with the correct authorities . . . to attempt to find him and guarantee his properly being however to all extents and functions he has disappeared. . . .
He made this journey to attempt to assist these with account issues, collect updates straight from the corporate, and to gather the funds from the sale of the cash to the Russian bulk patrons.
As of now, there is no such thing as a replace that may be supplied about Begin Choices, B2G or Thorex. You will have to contact the businesses straight.
The letter additionally acknowledged that DeMarr anticipated to obtain 2,424 BTC for traders, however that each one of those funds had been “worn out” and “gone as of at present.”
On June 1, 2018, Enos drafted, and Lawyer 1 despatched beneath his letterhead and signature, an analogous letter to an investor, stating that “DeMarr is presently lacking, location unknown however believed to be within the Balkans.
As DeMarr and Enos knew, these letters have been false.
By the point that they had been despatched, DeMarr had already returned to California, and had requested Enos to jot down these letters to keep away from going through the victims of his fraudulent scheme.
Between Begin Choices and Bitcoiin, round $11.4 million was stolen from traders.
Through the Related Interval, DeMarr obtained roughly $4.3 million in fiat forex from Begin Choices and Bitcoiin2Gen traders collectively.
He wired roughly $2 million to a checking account within the Philippines at Krstic’s path, and of the rest, DeMarr spent roughly $1.8 million of it on himself (greater than $1 million of which he spent in the course of the B2G ICO Interval).
These bills included greater than $170,000 in funds on the lease of a Porsche car (in addition to further BMW and Jeep funds), greater than $600,000 to repay his private bank cards, no less than $78,000 for home renovations, and roughly $400,000 towards the reimbursement of private loans.
In October 2018, lengthy after the fraudulent scheme had collapsed and traders have been unable to acquire any refunds of their investments, DeMarr used investor funds to fund a private journey to Cabo, Mexico.
Nowhere within the B2G Advertising Supplies or in any of the investor calls did DeMarr or Krstic disclose that DeMarr can be utilizing almost half of the fiat forex he raised for his personal private use.
What Krstic did with the $9 million he stole isn’t disclosed within the SEC’s lawsuit.
For his or her half in operating the Begin Choices and Bitcoiin Ponzi schemes, the SEC has sued Kristijan Krstic, John DeMarr and Robin Enos for
- violations of the Securities Act;
- violations of the Change Act;
- aiding and abetting violations of the Securities Act; and
- aiding and abetting violations of the Change Act.
The regulator is in search of an injunction towards all three defendants, in addition to disgorgement and a civil penalty.
I’ve added the SEC’s case to our calendar, so keep tuned for updates as we proceed to trace the case.
In associated information, John DeMarr has additionally been arrested on expenses regarding the Begin Choices and Bitcoiin Ponzi schemes.
I’ll present a hyperlink to a separate article beneath as soon as it’s printed.
Replace 2nd February 2021 – Article on John DeMarr’s arrest and legal case is now dwell.