By CCN Markets: A scammer that called himself the “coyote of Wall Street” has admitted to telling clients he would invest their money in cryptocurrency only to keep it for himself. Patrick McDonnell, a 46-year-old from Staten Island in New York, pleaded guilty to one count of wire fraud on Friday.
He explained to U.S. District Judge Nicholas Garaufis, in comments reported by Bloomberg, that he spent the money on himself:
I perpetrated a fraud. I claimed to invest it in virtual currency and spent it on personal expenses.
How the “Coyote of Wall Street” Worked
McDonnell, also known as Jason Flack, ran a company called CabbageTech Corp., which also went by the name Coin Drop Markets. Over a three-year period, he claimed on social media to have traded over $50 million for over 8,000 investors.
The Friday case claimed that McDonnell took investor money for himself and spent at least $194,000. He took over $164,000 from the man at the center of the Friday case, telling the investor the stake had risen to $274,000.
McDonnell will now face sentencing on September 10. He now faces between two and two-and-a-half years in prison due to a plea agreement.
Although the commodity in question was high-tech, there was nothing new about McDonnell’s methods. Richard Donoghue, a U.S. attorney for the Eastern District of New York, said in a statement reported by Law360:
McDonnell has admitted that he used old-fashioned deception to defraud investors seeking to trade 21st-century currencies.
This was not the first time McDonnell found himself in court. In August 2018, McDonnell and his firm received a big fine and a digital assets trading ban. The case, filed by the Commodity Futures Trading Commission, claimed that McDonnell lied about the website getting hacked in June 2017 to suspend its services.
Patrick K McDonnell – used his company CabbageTech and Coindropmarkets to trick people into giving him money to trade for him, but Pat stole the money, closed down the websites, and pretended he got hacked.
— Uncle Yak (@Yakherders) January 22, 2018
McDonnell received a fine of $1,161,716. Of that figure, $871,287 was for penalties and the remaining $290,429 was for restitution.
McDonnell’s Story Had Some Surprise Effects
When the CFTC brought the case against CabbageTech in January 2018, the commission accused the defendants of making the most of the cryptocurrency craze. The commission’s director of enforcement, James McDonald, said:
As alleged, the Defendants here preyed on customers interested in Bitcoin and Litecoin, promising them the opportunity to get the inside scoop on the next new thing and to benefit from the trading acumen of a supposed expert.
Another CFTC case, filed at the same time, alleged that Colorado-based Dillon Michael Dean operated a Ponzi scheme. The scheme misappropriated $1.1 million in bitcoin from 600 investors. Details of a third suit were sealed.
Perhaps one of the strangest outcomes of the CFTC’s case against McDonnell was it led to bitcoin being classed as a commodity:
I'm still laughing that CabbageTech is what lead to a definition of cryptocurrencies as commodities.
Life is truly poetic if you know where to look.
— Bryce Weiner (@BryceWeiner) March 8, 2018