The U.S. Department of Justice (DOJ) announced that a “cryptocurrency founder” was arrested and faces 10 years in prison for not paying taxes. The indictment against Amir Bruno Elmaani was unsealed in Manhattan federal court. Moreover, the U.S. Securities and Exchange Commission (SEC) separately filed civil charges against him.
The DOJ alleges that he made millions of dollars from selling the cryptocurrency he founded called “Oyster Pearl” but evaded reporting his income to the Internal Revenue Service (IRS). The Department of Justice considered his tax evasion scheme involves “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 operated exclusively online under the pseudonym Bruno Block, the DOJ said. After selling the pearl tokens in an initial coin offering (ICO) that happened in September and October 2017 and on exchanges, he announced his goal to take a “founder’s share” of the tokens for his own personal use. “Elmaani owned and controlled the subsequently established company Oyster Protocol Inc. through a shell company not associated with his true name,” the DOJ says.
A statement issued by Bruno Block on June 7, 2018, says that he had to move the tokens to a various cryptocurrency wallet “in order to avoid being double-taxed.” However, the DOJ revealed that “In truth, Eemaani did not report or pay tax on any of his cryptocurrency proceeds,” adding:
“Elmaani used friends and family as nominees to receive cryptocurrency proceeds and transfer them or U.S. currency to his own accounts.”
According to the DOJ, “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.”
The exit scam started in October 2018 when Elmaani minted new pearl tokens for his own personal use, rising its total supply even though the number of pearl tokens was purposedly fixed. He immediately converted the new tokens to other forms of cryptocurrencies, making the token to be delisted by exchanges, sending the price of the token plummeting. The DOJ detailed:
“Elmaani carried out the exit scheme only days before the exchange he had used to cash out his pearl tokens was set to require ‘know your customer’ personal identifying information from its users.”
The DOJ also stated that Elmaani falsely claimed that he only had about $15,000 of income from a “patent design” business in the tax return he filed in 2017. He did not file a return in 2018 but spent over $10 million on multiple yachts. He also spent $1.6 million at a carbon fiber composite firm, hundreds of thousands of dollars at a home improvement store, and over $700,000 for buying two homes. The DOJ concluded: that Elmaani, cryptocurrency founder, is charged for not paying taxes, each of which carries a maximum sentence of five years in prison.
Meanwhile, the SEC stated at the same time as the DOJ that Elmaani has been charged with conducting a “self-minting scam” and an unregistered ICO. They described that he conducted “an illegal securities offering of digital tokens and for his scheme to profit by minting millions of unauthorized tokens for himself at no cost and selling them into the secondary market, thereby causing the value of others’ tokens to plummet.”