Leader of $70M Cryptocurrency and Binary Options Fraud Schemes Extradited to the U.S.

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Leader of $70M Cryptocurrency and Binary Options Fraud Schemes Extradited to the U.S.

Today, the United States Department of Justice announced the extradition of Serbian national Kristijan Krstic to the United States, where he faces charges in two separate federal indictments in the Northern District of Texas and Eastern District of New York for his alleged participation in coordinated cryptocurrency and binary options schemes.

According to TRM, Binary options are widely linked to scams and fraud around the world, and their operators have faced a number of recent law enforcement actions. Binary options are financial instruments where investors bet on the price of a financial asset going above or below a specified amount within a set timeframe. If they bet correctly, they can receive significant profits via an “all-or-nothing” payout.

Given the high stakes involved, these products are widely considered high-risk for retail investors and are banned in many jurisdictions. Binary options are legal but heavily regulated in the U.S., with trading permitted only on authorized exchanges. However, a significant – and growing – portion of the binary options market operates through non-compliant online trading platforms, according to an investor alert issued by the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC). The alert observes a rise in fraud complaints linked to binary options trading platforms in recent years.

The ability to make deposits in cryptocurrency is enhancing this appeal. With easy cross-border money transfers and little-to-no KYC or AML controls, crypto has made online binary options platforms more accessible than ever before. As a result, more investors are in danger of being drawn into high-risk, unregulated and potentially fraudulent schemes.

In March 2020, a federal grand jury in the Northern District of Texas indicted Krstic for his role in defrauding investors worldwide out of more than $70 million. Krstic and more than a dozen other alleged fraudsters were also indicted on charges of conspiracy to commit wire fraud and conspiracy to commit money laundering for creating and marketing more than 20 fraudulent cryptocurrency and binary options investment platforms.

In February 2021, a federal grand jury in the Eastern District of New York also indicted Krstic for his role in a cryptocurrency scheme in which he solicited U.S. investors using two fraudulent online investment platforms. According to court documents, Krstic was the founder of two digital-asset investment platforms, Start Options and B2G, which he and his co-conspirators used to fraudulently induce U.S. investors to purchase securities in the form of investment contracts in Start Options and B2G. 

According to the indictment the money that investors in Start Options and B2G sent was never invested and instead, was laundered internationally to a Philippines-based financial account and digital-currency wallet and diverted to John DeMarr, a U.S.-based promoter of the fraud. DeMarr, 55, of Santa Ana, California, the former Director of North American Operations for Start Options and B2G, was sentenced to five years in prison for his role in the scheme. 

This case is an example of interagency and international law enforcement and regulatory coordination and cooperation between the U.S. Department of Justice, IRS-Criminal Investigations, the United States Secret Service, the FBI and the Securities and Exchange Commission. In addition, the government of Georgia provided significant assistance in the extradition of Krstic to the United States.

In our Illicit Ecosystem Report, TRM Labs identified about $9.04 billion being sent to various types of fraud schemes in 2022.

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