New York Fraudster Faces 20 Year Sentence for Facebook Crypto Scam

New York resident Patrick McDonnell AKA "Jason Flack" was arrested and charged with nine counts of wire fraud in a…

New York resident Patrick McDonnell AKA "Jason Flack" was arrested and charged with nine counts of wire fraud in a Brooklyn court on Tuesday. McDonnell allegedly convinced others to "invest" in cryptocurrency through Facebook and Twitter, stealing the money for his own use and providing false balance statements in return.

Scammer Ran Facebook & Twitter Crypto Scam from Staten Island Home

McDonnel was fined $1 million last year and represented himself in court, claiming to be unable to afford a lawyer despite the court strongly urging him to seek counsel.

He was fined and banned from trading after claiming in June that his company site had been hacked and investor funds lost. It emerged that the company, portrayed as a relatively large operation, consisted solely of the defendant and was run from his Staten Island home.

United States Attorney Richard Donoghue stated a case against the defendant in no uncertain terms.

"As alleged, the defendant defrauded investors by making false promises and sending them fraudulent balance statements, hiding the fact that he was stealing their money for his personal use. The defendant’s fraud ends now, he will be held responsible for his criminal conduct."

Bizarre 'CabbageTech' Scam Raked in $250,000 from Victims

So it wasn't as lucrative as the infamous Bitconnect scam, but CabbageTech is still pretty bizarre. | Source: YouTube

The dubiously-named CabbageTech company was the entity the defendant solicited his investments with. USPIS Special Agent-In-Charge Bartlett briefly described the process in taking the suspect down.

"The defendant, Patrick K. McDonnell, used smoke and mirrors to allegedly dupe investors into paying his company—CabbageTech, for advice and strategies on crypto-currency trading. However, Postal Inspectors and their federal law enforcement partners unmasked McDonnell and his scheme to defraud investors, and brought him to justice for his alleged criminal actions."

McDonnell fraudulently described himself as an experienced crypto trader, promising expert advice and offering to purchase and trade cryptocurrency on behalf of his clients. The service was modeled after that of a stockbroker - McDonnell would take a fee in exchange for taking client capital and generating profits for them.

However, he reportedly took not only his fee but the full capital sum. Starting in May 2016 through CabbageTech Corp AKA Coin Drop Markets, he simply stole the money sent to him without ever investing it for clients. He sent fake balance statements showing that the clients had earned profits to keep them from requesting their money back too soon. Whenever someone asked for a refund, he would delay for a while and then stop responding.

The Surprising Impact CabbageTech Had on Bitcoin Regulation

McDonnell stole a sizeable sum of money over the years. From ten separate victims, he took $194,000 in USD as well as 4.41 bitcoins, 206 litecoins, 620 ethereum classic tokens, and 1,342,634 verge tokens, all of which amounts to over $250,000 even in today's bear market. If convicted, McDonnell could face up to 20 years in prison.

Notably, the scheme was instrumental in the CFTC's successful push to classify bitcoin as a commodity. Last August, U.S. District Judge Jack Weinstein ruled that CabbageTech and McDonnell flouted the Commodity Exchange Act by engaging in “egregious intentional violations” of federal regulations and law.

Share
Conor Maloney @iWriteCrypto

Conor is a blockchain and cryptocurrency journalist from Ireland and founder of The Written Craft content service. A firm advocate of decentralization through blockchain technology, he's also an off-grid enthusiast and really fun at parties too. Other stories written by Conor: https://www.ccn.com/author/conor-maloney/ Follow him on Twitter @iWriteCrypto to hear him roar.

Show comments

News Tip?

tips (at) ccn.com