Decentralized and anonymous data storage platform Oyster Protocol was an exit scam that brought founder Amir Bruno Elmaani—also known as Bruno Block—a lavish lifestyle featuring several yachts, according to the U.S. Department of Justice.
The scam run by Elmaani, also known as Bruno Block, involved the sale of Oyster pearl tokens in September and October 2017, authorities charged today.
“Elmaani purported to establish a high-tech method of financing a high-tech business, but the underlying scheme was old-fashioned fraud and tax evasion,” said Audrey Strauss, acting U.S. Attorney for the Southern District of New York on Dec. 9. “Elmaani allegedly generated millions by soliciting investor money through his own cryptocurrency, adding to the purportedly fixed number of tokens and converting them to other cryptocurrencies, and failing to report or pay tax on any of the proceeds.”
The Justice Department explained that “although the number of Pearl tokens was purportedly fixed, Elmaani used his access to the blockchain technology used to create Pearl tokens to mint new tokens, which he took for his own personal use (the ‘Exit Scheme’).
It added that as a “result of Elmaani’s conduct, trading in Pearl tokens halted… and the price of Pearl tokens held by investors dropped substantially.”
Elmaani was arrested and charged with two counts of tax evasion, each of which carries a maximum sentence of five years in prison.
The United States Department of Justice announced on Dec. 9 that the indictment in Manhattan federal court charged Elmaani with tax evasion.
The announcement notes that he had a quite luxurious lifestyle:
“ELMAANI dealt substantially in precious metals, kept gold bars in a safe on a yacht he owned, and used large amounts of cash to pay personal expenses.”
In 2018, it added, he spent more that “$10 million for the purchase of multiple yachts, $1.6 million at a carbon fiber composite company, hundreds of thousands of dollars at a home improvement store, and over $700,000 for the purchase of two homes”
The announcement explained that he did not report Oyster Pearl’s 2017 initial coin offering (ICO) earnings to the U.S. Internal Revenue Service (IRS), instead claiming income of just $15,000. He also made further effort to hide is proceeds:
“As alleged, ELMAANI made millions of dollars from the sale of a new cryptocurrency but evaded reporting that income to the IRS, including by filing a false tax return, operating his business and owning assets through pseudonyms and shell companies, obtaining income through nominees, and dealing in gold and cash.”
Elmaani was arrested this morning in Martinsburg, W.V., and will be arraigned today. Furthermore, the United States Securities and Exchanges Commission (SEC) is taking separate civil legal action against him—presumably for failing to register his ICO’s tokens as securities.
Strauss said that Elmaani claimed “to establish a high-tech method of financing a high-tech business, but the underlying scheme was old-fashioned fraud and tax evasion.”
FBI Assistant Director William F. Sweeney Jr. also noted that the Oyster Pearl founder took advantage of 2017’s ICO boom:
“Taking advantage of the ever-so-popular cryptocurrency market, Elmaani allegedly capitalized on the investments of those who purchased virtual currency through Oyster Pearl, which he founded. […] With minimal reported income in 2018, he still managed to spend over $10 million for the purchase of yachts, but after today’s arrest, he won’t be sailing anywhere anytime soon.”
IRS Special Agent-in-Charge Kelly Jackson claimed that “using cryptocurrency as a means to defraud and evade taxes will not stop our agents from doing what we do best—following the money.”
That the use of cryptocurrency—most notably bitcoin—does not protect against law enforcement investigations is confirmed by the recent arrest of alleged Mexican human trafficker Ignacio Santoyo, who was captured thanks to his use of Bitcoin (BTC) for money laundering purposes, which allowed law enforcement to follow the data trail.