In a major development, the US Securities and Exchange Commission (SEC) has charged former New Jersey State Correctional Police Officer, John A. DeSalvo, for allegedly orchestrating a fraudulent crypto fraud scheme that specifically targeted law enforcement personnel.
DeSalvo stands accused of raising funds through the unregistered offering of the Blazar Token, a crypto asset he created, which eventually collapsed in May 2022.
The SEC’s complaint further alleges misappropriation of investor funds, including diverting substantial amounts to his crypto asset wallets and using them for personal expenses, such as a bathroom renovation.
Crypto Scam Targeting Cops?
According to the SEC, DeSalvo managed to raise a minimum of $620,000 from around 220 investors between the launch of the Blazar Token in November 2021 and its subsequent collapse.
The complaint reveals that DeSalvo made “false claims” to investors, stating that the Blazar Token was registered with the SEC and that it would replace existing state pension systems. He further “deceived” investors by falsely assuring them that automatic payroll deductions would facilitate their investment and guarantee extraordinary returns.
Ultimately, DeSalvo allegedly misused and misappropriated the funds entrusted to him. Notably, the SEC’s complaint highlights DeSalvo’s deliberate targeting of fellow law enforcement and first responders in his fraudulent schemes.
In addition to the Blazar Token scheme, the SEC’s complaint also exposes an earlier fraud initiated by DeSalvo. Beginning in late January 2021, he allegedly solicited investors, primarily through social media, for an investment venture that involved trading stocks, options, and crypto asset securities.
Within weeks of raising $95,000 from 17 investors, DeSalvo reportedly lost a significant portion of the funds through speculative investments and misappropriated the rest. He proceeded to inform investors that poor market conditions led to the complete devaluation of the securities.
SEC Accuses Former Officer Of Exploiting Trust
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, condemned DeSalvo’s actions, stating:
We allege that DeSalvo orchestrated several fraudulent investment schemes that targeted law enforcement personnel and promised astronomical returns, including one involving a crypto asset security that would somehow replace traditional state pension systems. Rather than producing any returns or revolutionary technology, he instead misappropriated and misused investor money.
Grewal further emphasized the breach of trust perpetrated by DeSalvo, who “exploited” his former position as a corrections officer to gain the confidence of fellow law enforcement professionals, many of whom invested their “hard-earned” savings with him.
The SEC’s complaint, filed in the U.S. District Court for the District of New Jersey, charges DeSalvo with violating antifraud and offering registration provisions of the securities laws. The SEC seeks injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and imposition of civil penalties.
Simultaneously, the U.S. Attorney’s Office for the District of New Jersey has announced criminal charges against DeSalvo, further underscoring the severity of the allegations and the commitment to holding him accountable for his actions.
At the time of writing, Bitcoin (BTC) maintains its upward trajectory in price, currently trading at $26,700, reflecting a notable increase of over 3% within the past 24 hours.
Featured image from iStock, chart from TradingView.com