What a shock. You step off a plane on a quick stopover on your way to Mexico and you are greeted by US Marshals. There you are, packed and ready for the beach, sunshine, and cocktails, and instead you are hauled off to jail for evading justice. Surely a misunderstanding!
Riccardo Spagni — aka @fluffypony — was arrested in Nashville on July 21, when a private charter plane he was flying from New York to Los Cabos stopped to refuel. US Marshals brought him in on extradition charges on behalf of South Africa, where he was living up until March 21. Here is the executed warrant.
“I have been held in contempt of court and [am] currently awaiting extradition. I am hoping to resolve this misunderstanding within a short while. In the meantime my business affairs will continue under the leadership of my partners,” Spagni communicated through his wife’s Twitter account Monday.
At issue — Spagni, who is 38, apparently did not show up for court appearances in South Africa on May 24 and April 19. After the second missed court appearance, a warrant was issued for his arrest, and the wheels of hunting him down sprung into motion. As it turns out, the US signed an extradition treaty with South Africa in 1999.
Spagni, who enjoys the good life, is best known as the former lead maintainer of Monero (XMR) — a privacy coin that’s a favorite among ransomware hackers and money launderers. He stepped away from that job in late 2019 to co-found Tari, a Monero sidechain for “privacy-focused open source projects.”
Spagni is charged with invoice fraud. Between October 2009 to June 2011, when he worked as an IT manager at Cape Cookies — a cookie company with about 150 employees — he submitted fake invoices to the firm to the tune of nearly $100,000, according to documents filed with a Tennessee district court. He could face up to 15 years.*
US attorneys argue that Spagni should be detained without bail because he is a flight risk. After all, he already pulled a no-show for two court appearances in South Africa.
“Now that he is aware that South Africa seeks his extradition from the United States, he has strong incentive to disappear, whether to a third country or to an underground location within the United States,” the government said.
On top of that, Spagni has the means to run off in style. He holds a lot of crypto, and his other assets include two homes in upstate New York and a ridiculously expensive watch, prosecutors argue. A photo of him wearing that watch has been floating around Twitter.
Someone using a ProtonMail account tipped off Magistrate Judge Alistair Newbern about Spagni’s activities and assets. The judge obviously felt the information was pertinent, because she included the email as evidence on Aug. 3, the same day she received it.
The sender points out that Spagni attended the crowded Bitcoin Miami conference on June 4-5, 2021. A photo in Decrypt shows him standing unmasked alongside Paris Hilton and Dan Held, marketing director at crypto exchange Kraken, at Story nightclub in Miami.
The conference was a COVID hotspot. Bitcoiners are famous for being anti-vaxxers and several attendees reported coming down with symptoms of the disease soon after.
As we see later, Spagni uses his fear of catching COVID as an excuse for not showing up to things, like court appearances, but somehow it didn’t deter him from going to a virus laden bitcoin conference.
In addition to the $800,000 Richard Mille watch he owns, the email notes that Spagni owns another $750,000 watch and has a car collection that includes a 458 Ferrari Spider, valued at $260,000, as well as a Lamborghini.
The original email contained links — likely some sort of proof that Spagni owns these objects — but the links don’t come through in the court filing. (If I find them, I’ll add them later.)
Spagni’s defense team
Spagni has hired notable crypto lawyer Brian Klein — the same lawyer hired by former Ethereum developer Virgil Griffith, who was recently taken back into custody for violating his bail restrictions. Klein works out of Los Angeles for his firm Waymaker. Spagni is also represented by Bone McAllester Norton in Nashville.
His defense team — four attorneys total — submitted a 20-page response to the government’s motion for detention ahead of Spagni’s extradition hearing. A video hearing on Spagni’s pre-trial detention will be held on Aug. 5.
So, what was Spagni thinking when he left South Africa on March 21? He knew he had a court appearance coming up. He had already rescheduled the appearance several times. At first, the court hearing was set for June 18, 2020. His counsel then delayed it to October 7, 2020, and then again to March 24, 2021, using Spagni’s fear of catching COVID as an excuse, according to court docs.
Spagni, as his current defense team points out, is grossly overweight and has asthma, factors that put him at greater risk of becoming seriously ill if he catches the virus.
Meanwhile, in the midst of rescheduling his court appearances, he was preparing to emigrate to the US under an O-1 Visa for Individuals with Extraordinary Ability or Achievement, which he obtained in October 2020.
These visas generally go to people who show huge talent in business or the arts with some sort of national or international notoriety. Apparently, developing a crypto used for money laundering counts as an “extraordinary achievement.” I had no idea.
In any event, Spagni and his wife were in Bermuda on March 30 with plans to head to the US when Spagni got notice of his April 19 court appointment in South Africa. So what did he do? Instead of turning around and going back to his home country, he continued onward, entering the US on April 14.
For some reason — and it is not clear how he came to this conclusion — Spagni presumed he could attend the proceedings in South Africa remotely, making it okay, in his mind, for him to leave the country.
Spagni and his wife were “deathly afraid of making an immediate return trip that would have doubled their exposure to COVID-19 and potentially jeopardized their emigration to the United States,” his defense team writes.
His lawyers go on to say that the courts in South Africa had Spagni’s telephone number, email, and his secretary’s telephone number, yet none of these avenues of contact were tried before the April 19, 2021, warrant was issued.
In contrast, federal prosecutors claim that “South African authorities attempted to locate SPAGNI at his home address and through contacts with his friends and family, but to no avail. Further investigation revealed that SPAGNI had fled South Africa.”
Did he forget to inform the courts he was leaving the country? Once they saw his house was empty, where they obliged to politely call him to see if there was perhaps a … misunderstanding?
Spagni’s defense team lists three “special circumstances” for why Spagni should be let out on bail.
Special circumstance #1: his health. Currently, Spagni is being detained in Kentucky. “Every day Spagni is detained, he is in life-threatening danger,” his counsel said.
“Because of Spagni’s very real concerns about COVID-19, he is permitted to stay in solitary confinement for 24 hours of the day in order to lower the risk of COVID-19 transmission to himself. This is no easy choice for Spagni, given that it means he is in constant isolation and has not even seen sunlight in over a week.”
I must admit, it is truly impressive that Spagni was able to overcome this level of abject terror to make it to Bitcoin Miami. I don’t think I could have done it.
Special circumstance #2, defense argues, is that Spagni has a high probability of defeating his extradition because the case is old and the bank records needed to prove his guilt were lost in a fire in 2009.
“In other words, South African authorities have no means to prove that Spagni was the recipient or beneficiary of the allegedly fraudulent proceeds. Beyond that, the case is severely dated and any witness testimony at this juncture, especially given the lack of corroborating paper records, is likely to be unreliable.”
While all that may be true, Spagni is not on trial in the US. When it comes to his extradition hearing, the Secretary of the State determines whether to surrender a fugitive. There only needs to be enough evidence to sustain the charge under the provisions of the treaty.
The third and final special circumstance they give is that the nature of the case and how it has been handled favor bail.
“The prosecution against Spagni has stopped, started, and meandered for over a decade and the decision to issue a warrant for Spagni’s arrest is vexing considering that the government has delayed the matter for a period of years because it was not prepared to proceed forward with trial as scheduled, but Spagni’s failure to attend a court session in person during a pandemic when he was unvaccinated and located in a different part of the world was considered grounds for an arrest warrant (and extradition).”
While Spagni’s defense team will zero in on Spagni’s COVID angst, prosecutors are going to focus on the fact that he is a flight risk. He knew he had unfinished business in South Africa. Yet, he delayed his court appearances several times, all the while making plans to leave the country and relocate to the US.
Getting arrested while you’re en route to Mexico doesn’t look good either. And the fact that Spagni recently attended a packed bitcoin conference where nobody was wearing a mask will not help his cause. But who knows? Maybe with Klein’s support, he’ll see the sunshine again — albeit while wearing an ankle bracelet.
*He could face up to 15 years, not 20, as stated earlier.
(Updated Aug. 4 to clarify that Spagni missed two court dates, May 24 and April 19, 2021, and that he left South Africa, bound for Bermuda and then the US, on March 21.
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