US prosecutors: Lawyer laundered $400m in crypto scam

Defendant claims he was unaware Bulgaria-based OneCoin was a fraudulent operation.

Crypto/Bitcoin image/BBG Photographer: Mary Turner/BLOOMBERG
Prosecutors in Manhattan allege that a phoney investment fund set up by lawyer Mark Scott was used as a vehicle to launder hundreds of millions from a cryptocurrency scam [File: Mary Turner/Bloomberg]

A prosecutor told a jury that a lawyer on trial for laundering $400 millionin a massive cryptocurrency scam was motivated by a goal he once stated in a text message: “50 by 50,” or $50 million by age 50.

Mark Scott, 51, set up a phony investment fund that he used to process money from Ruja Ignatova, the Bulgarian woman behind OneCoin Ltd., a Ponzi scheme based on a fraudulent blockchain-based digital currency system, Assistant U.S. Attorney Nicholas Folly said in his closing argument Wednesday in Manhattan federal court. Folly claimed Scott was paid $50 million “just for laundering Ruja’s money.”

“This is what Scott desperately wanted and this is what motivated him to commit these crimes,” Folly said.

Prosecutors claim Scott, a former Locke Lord LLP partner, used the money to fund a lavish lifestyle, buying a 57-foot yacht, multimillion-dollar homes in Cape Cod, Massachusetts, and luxury watches and cars, including three Porsches.

“Mr. Scott did not know the OneCoin funds were illegal,” his lawyer, Arlo Devlin-Brown, told jurors. “None of it really matters unless they’ve proven the one thing that really matters in this case: What was inside Mark Scott’s head?”

The lawyer said that Scott believed he was operating a legitimate investment fund with money from Ignatova, who is to blame for the fraud. “This case is full of reasonable doubts,” he said.

Prosecutors claim Scott used a network of shell companies, offshore bank accounts and fraudulent documents to hide the origin of $400 million of illegal OneCoin proceeds. Scott is charged with money-laundering conspiracy and bank-fraud conspiracy. Before the start of both sides’ closing statements, Scott told the judge he wouldn’t be testifying in his own defense.

OneCoin generated 3.4 billion euros ($3.8 billion) in revenue from the fourth quarter of 2014 to the third quarter of 2016, according to the government, but had no real value and couldn’t be used to buy anything.

At its height, OneCoin claimed to have more than three million members worldwide. It operated as a multilevel marketing network that paid commissions to members for recruiting others to buy OneCoin packages, prosecutors say. Jurors heard testimony from victims who had invested retirement and college savings and were left with nothing.

Also charged in the case are Ignatova, one of two people who founded OneCoin in 2014 in Sofia, Bulgaria, and her younger brother Konstantin Ignatov. Ignatova, known at OneCoin’s peak as the “cryptoqueen,” disappeared in 2017 as OneCoin came under suspicion. Ignatov was arrested at Los Angeles International Airport in March and is in custody.

He pleaded guilty and testified as a witness against Scott.

The trial began with opening statements on Nov. 5. Jurors will begin deliberating Thursday morning.

The case is U.S. v. Scott, 17-cr-630, U.S. District Court, Southern District of New York (Manhattan).

Source: Bloomberg