Judge reschedules Reggie Fowler’s trial for next year

reggie-fowler-1Reginald Fowler stood before a New York judge Thursday and pleaded not guilty to wire fraud. The new charge brought the total counts against him to five. An irked-looking judge agreed to move the trial date, originally set for next month, to Jan. 11. (Court doc.)

The wire fraud charge was added in a superseding indictment on Feb. 21. The Arizona businessman and ex-NFL owner had already pleaded not guilty to the four prior counts, which had to do with bank fraud and illegal money transmitting. He was looking at a trial date of April 28.

However, with the new charge piled on, Fowler’s lawyer James McGovern wanted more time to prepare. Matthew Lee of Inner City Press, live-tweeted Fowler’s arraignment in court today.  

“The trial is scheduled. Mr. Fowler did not plead guilty. Now he wants an adjournment of the trial,” said U.S. Attorney Jessica Fender, according to Lee’s account. 

Judge Carter granted the adjournment and offered Oct. 28 as a new date for the trial. But Fender turned it down saying her colleague was unavailable at that time.

“Really? A prosecutor not being available is not grounds under the Speedy Trial Act,” said Judge Carter.

Finally, a new date of early next year was settled upon — and the judge appeared irritated with the government, Lee told me.

The law moves slow

Nothing is happening fast in this case. But the right to a speedy trial isn’t for the benefit of the public — it’s for the benefit of the defendant, who can waive it. And since Fowler is free on $5 million bail while he awaits trial, he can afford to do that. After all, he could find himself behind bars for many years after the trial.

Fowler was originally indicted on April 30, 2019, along with Israeli woman Ravid Yosef, who remains at large. The pair allegedly ran a shadow banking service on behalf of Crypto Capital Corp, a Panamanian payment processor that counted Bitfinex and the failed QuadrigaCX cryptocurrency exchanges as customers.

A plea deal would have seen three out of four charges against Fowler dropped. The deal was conditioned upon him forfeiting $371 million* allegedly tied up in some 50 bank accounts, but he wouldn’t—or couldn’t—agree to that.

After Fowler turned down the plea deal, federal prosecutors heaped on the newest charge of wire fraud. The fifth count was no surprise. In a court transcript filed in October 2019, Assistant U.S. Attorney Sebastian Swett told Judge Carter:

“We have told defense counsel that, notwithstanding the plea negotiations, we are still investigating this matter, and, should we not reach a resolution, we will likely supersede with additional charges.”

Fowler, who resides in Chandler, Ariz., will likely go about his daily life until next year when his trial begins. Is he rattled by any of this? Who knows. This is a man who has plenty of experience dealing with lawyers and judges. In 2005, ESPN reported that he had been sued 36 times.

Updated (3/7/20) to add names of attorneys.

*Updated (3/5/20 at 11:30 p.m ET) to note that Fowler’s proposed plea deal was based on him forfeiting $371 million, not $371,000 as previously stated.

News: Ripple paid Moneygram $11M, weird stuff going on with e-Payments, fraudster tries to buy Perth Glory, another bitcoin ETF bites the dust

As you know, I left my most recent full-time gig, so I’m solo again. I’m going to keep on writing, but I need to figure out how to make ends meet. I’ll be writing more for my blog, possibly writing some e-books, and relying on support from patrons. If this newsletter is worth buying me a latte every four weeks, consider becoming a monthly supporter.

Now, on to the news. Since I didn’t write a newsletter last week, a few of these items stretch beyond the last seven days.

Filming for Quadriga documentary

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Filming at a coffee shop in Vancouver Monday.

If you’ve been following me on Twitter, you know I was in Vancouver all weekend filming for an upcoming Quadriga documentary for Canadian public broadcast station CBC. It was a whirlwind adventure, loads of fun, and I got to meet my idol and fellow nocoiner David Gerard for the first time. He is 6’4″, which helps explain why he is not easily intimidated by anyone. (My blog, David’s blog with more pics.)

On our second day of filming, the crew got shots of David and me at a coffee shop going through my Quadriga timeline in detail. Of course, the more we talked and went over things, the more unanswered questions we came up with.

Ripple has been paying Moneygram millions

Moneygram’s 8-K filing with the SEC must be a bit of an embarrassment for Ripple CEO Brad Garlinghouse. It reveals Ripple paid $11.3 million to Moneygram over the last two quarters. That’s in addition to the $50 million Ripple has already invested in the firm. (Cointelegraph, Coindesk.)

This is apparently the ugly truth to how Ripple works. The company appears to pay its partners to use its On-Demand Liquidity (formerly xRapid) blockchain platform and XRP tokens and then say nice things about how well things are going. (FT Alphaville)

Of course, none of this is news to @Tr0llyTr0llFace, who wrote about how Ripple pays its partners in his blog a year ago. “Basically, Ripple is paying its clients to use its products, and then pays them again to talk about how they’re using its products,” he said. 

Ripple class-action to move forward

In other Ripple news, a federal judge in Oakland, Calif., has granted in part and denied in part Ripple’s motion to dismiss a class-action lawsuit claiming the company violated U.S. securities laws. There’s a lot to unpack here, but overall it’s a win for the plaintiffs. In other words, the lawsuit will proceed even though it’s been trimmed back a bit. (Court order, CoinDesk, Bloomberg

Ripple had claimed in its November court filing that the suit could topple the $10 billion market for XRP. Well, yeah, one would think so, especially if XRP is deemed a security and gets shut down by the SEC. This class action may be laying the groundwork for that. 

Reggie Fowler gets hit with another charge

pexels-photo-2570139As if Reggie Flower did not have enough trouble on his hands. After forgoing a plea deal where three out of four charges against him would have been dropped, prosecutors have heaped on another charge — this one for wire fraud.

They allege that Fowler used ill-gotten gains from his shadow banking business, which he ran on behalf of Panamanian payment processor Crypto Capital, to fund a professional football league. The league isn’t named in the indictment, but a good guess says its the collapsed American Football League of which Fowler was a major investor. (My blog.)

The new charge should come as no surprise to those following the U.S. v. Fowler (1:19-cr-00254) case closely. In a court transcript filed in October 2019, Assistant U.S. Attorney Sebastian Swett told Judge Andrew Carter:

“We have told defense counsel that, notwithstanding the plea negotiations, we are still investigating this matter, and, should we not reach a resolution, we will likely supersede with additional charges.”

Fowler needs to go before the judge and enter his plea on the new charge before he can proceed to trial. Federal prosecutors are asking the judge to schedule arraignment for May 5, but it’s quite possible this is a typo and they meant March 5. (Court doc.)

Convicted fraudster won’t be buying Perth football team after all

LFE Founder Jim Aylward
LFE founder Jim Aylward on Twitter

The sale of Perth Glory Soccer Club to a London crypto entrepreneur fell through after it turned out that the man behind the company trying to buy Glory — businessman Jim Aylward — is convicted fraudster James Abbass Biniaz. (Imagine that, a person with a criminal past getting involved in crypto?)

Aylward had set up a group called London Football Exchange, a football stock exchange and fan marketplace powered by the LFE token. The grand scheme was for the company to buy soccer teams all over the world and integrate that business with the token.

Glory owner Tony Sage pulled out of the deal after traveling to London to go through a due diligence process with his lawyers and representatives of the London Football Exchange group. Sage had been promised $30 million by Aylward for 80% of the A-League club. (Sydney Morning Herald)

Here’s a recording of Aylward admitting the price of LFE is totally manipulated. “We control about 95% of the token holders,” he said.

Weird stuff happening with e-Payments

Something funny is going on with e-Payments, one of the biggest digital payments firms in the U.K. The London firm, which caters to the adult entertainment, affiliate marketing, and crypto industries, was ordered by the U.K.’s Financial Conduct Authority to suspend its activities as of Feb. 11 due to loose anti-money-laundering controls. That’s left ePayments’ customers unable to access their funds. Robert Courtneidge, one of its e-Payments’ directors stepped down the following week. Nobody knows why, but it looks like he was previously involved with the OneCoin scam. (FT Alphaville)

(BTW, on my flight back from Vancouver, I listened to the Missing Crypto Queen BBC podcast, which is all about OneCoin, and it’s fantastic. Definitely worth a listen.)

SEC shoots down another bitcoin ETF; Hester Pierce chimes in

In a filing posted Wednesday, the SEC set aflame another bitcoin ETF proposal. The regulator claims Wilshire Phoenix and NYSE Arca had not proven bitcoin is sufficiently resistant to fraud and market manipulation. (Their idea was to mix bitcoin and short-term treasuries to balance out bitcoin’s volatility, but the agency still wasn’t keen.) The SEC has rejected all bitcoin ETFs put before it to date, so there’s no new news here.

Predictably, though, SEC Commissioner Hester Pierce, aka “crypto mom,” filed her statement of dissent. She said the agency’s approach to bitcoin ETFs “evinces a stubborn stodginess in the face of innovation.” For some reason, Pierce seems to consistently confuse innovation with anarchy and giving bad actors free rein.

Speaking of which, she recently posted on Coindesk asking for suggestions to her ICO “safe harbor” plan. Attorney Preston Byrne responded, saying it would be hilarious if it weren’t so serious. He thinks the plan should be tossed in the bin.

Canada’s central bank venturing into e-currency

Canada’s central bank plans to lay the foundation for its own digital currency should the day arise where cash no longer rules. In a speech he gave in Montreal, Deputy Governor Tim Lane said there isn’t a compelling case to issue a central bank-backed digital currency right now, but the Bank of Canada is starting to formulate a plan in the event Canadian notes and coins go out of style. (Calgary Sun.)

Despite so many countries jumping into the game, central bank digital currencies are nothing new. They have been around since the 1990s, only nobody cared about them until Facebook’s Libra popped into the scene. Bank of Finland’s Alexi Grym recently did a podcast, where he talks about how the country launched its own Avanti project (a form of CBDC) in 1993. The idea sounded great in theory, but in practice, consumers didn’t like being charged to load the cards, especially since ATM withdrawals were free.

Drug dealer loses all his bitcoin

The problem with keeping track of the keys to your bitcoin is that it’s just too easy to lose them, as this U.K. drug dealer demonstrates. He jotted down the keys to his illicit $60 million BTC on a piece of paper. But then when he went to jail, his landlord gathered up all his belongings and took them to the dump. (Guardian.) This isn’t the first time millions of dollars worth of bitcoin have ended up in a trash heap.

FCoin insolvency bears hallmarks of funny business

Screen Shot 2020-02-26 at 9.39.31 PMFCoin, a crypto exchange based in Singapore, announced its insolvency on Feb. 17 after making the surprise discovery it was short 7,000 to 13,000 bitcoin—worth roughly $70 million to $130 million. The exchange blamed the shortage on a cacophony of errors following the launch of a controversial incentive program called “trans-fee mining.” There has been a lot of speculation that this was an outright scam. Now a new report by Anchain.ai shows BTC leaving the exchange’s cold wallets in droves right before FCoin shuttered and its founder Zhang Jian happily moved on to start a new business.

Quadriga was using Crypto Capital

The law firm representing QadrigaCX’s creditors believes the failed Canadian crypto exchange was funneling money through Crypto Capital. Financial documents that two former Quadriga users posted on Telegram show that to be true. (My blog)

Next question: Was Crypto Capital holding any Quadriga funds at the time the exchange went under? That’s going to be hard to track down given the exchange had no books.

Buffett still thinks crypto is a joke

Tron CEO Justin Sun paid $4.6 million to spend three hours with Warren Buffett and turn him into a crypto fan. He even gave the multi-billionaire some bitcoin. Turns out Buffett, promptly handed those BTC over to charity. He doesn’t want anything to do with bitcoin and still thinks crypto has zero value. “What you hope is someone else comes along and pays you more money for it, but then that person’s got the problem,” he told CNBC.

Steven Segal pays the price of being a shitcoin shill

Steven Segal thought he would bring in a little extra dough by shilling a shitcoin, but the effort backfired. The Hollywood actor has agreed to pay $314,000 to the SEC for failing to disclose payments he received for touting an ICO conducted by Bitcoiin2Gen (spelled with two “i”s) in 2018. He’ll pay a $157,000 disgorgement, plus a $157,000 fine on top.

The agency claims that Seagal failed to disclose he was promised $250,000 in cash and $750,000 worth of B2G tokens in exchange for his promotions. He even put out a cringe-worthy press release in 2018 titled “Zen Master Steven Seagal has become the brand ambassador for Bitcoiin2gen.” (SEC press release, Variety, CNBC)

Can someone check IOTA for a pulse?

How long does a blockchain need to be shut down for before it’s considered dead? How is it even possible to shut down something that is decentralized? Oh, wait, maybe it’s not.

IOTA has been offline for 14 days and counting ever since the IOTA Foundation turned off its coordinator node, which puts the final seal of approval on any IOTA currency transactions, to stop an attacker from slurping up funds from its wallet service.

The project has put together a tedious three-part series explaining the theft of its Trinity wallet, its seed migration plan and all the lessons it’s learned from the mishap. It’s all a bit mind-numbing, and you’ll feel a little dead after you read it, too.

News: Crypto Fyre Fest collapses, Virgil Griffith pleads not guilty, lawyers push to exhume body of Quadriga’s dead CEO

Only three weeks to go before David Gerard and I meet up together in Vancouver for work on a QuadrigaCX documentary. I hope the jet lag doesn’t take too much out of him. (He’s traveling from London.) I want to see what happens when he has a few drinks.  

Massive Adoption
(Photo: @crypt0fungus)

The comedy gold medal of the week goes to Massive Adoption, a bitcoin conference that’s now being called the Fyre Festival of crypto because of the packages sold. Jacob Kostecki promised roundtrip flights, hotels and parties for $300-$400. In a shock to all (note the sarcasm), he called the whole thing off. But don’t worry, your refunds are coming. It may take months, but they’re coming. Promise. I swear. So sorry about all this.

David Gerard was the one to originally report on #CryptoFyreFest. I wrote two stories for Modern Consensus on the topic. You’ll find them here and here.  

Our friend Jacob appears to have alienated more than a few casual strangers on the internet. His own brother Jedrek has been speaking out about him on social media. According to Jedrek, Jacob has left a trail of debt and broken promises behind him. And yes, Jacob confirmed to me in a DM that Jedrek is indeed his brother.

Jacob’s behavior reminds me a bit of Gerald Cotten’s when he was running HYIP schemes on TalkGold: Collect people’s money, and then later, tell them the scheme/event has collapsed. Blame it on something external to your control. (Jacob, for instance, is now pointing fingers at everyone, even me.) Apologize profusely and start issuing refunds in good faith, but slowly and over a long period, until people finally give up and go away. 

Also, I can’t help but notice the strong resemblance of the Massive Adoption logo to that of this media consultancy firm.

Virgil’s pot of gold?

Virgil Griffith, former head of special projects for Ethereum Foundation, pleaded not-guilty on Thursday to conspiring to violate the International Emergency Economic Powers Act. He flew to New York from his parent’s house in Tuscaloosa, Ala., to enter his plea. I guess this means he is planning to go to trial? I have to wonder where all the money is coming from. Brian Klein, Griffith’s high profile L.A. lawyer, has made several trips to New York and these legal services don’t come cheap. Griffith’s parents and sister have already put up $1 million for his bail

Telegram’s ICO investors surface

The SEC alleges that Telegram ran a scheme whereby wealthy investors—including several Silicon Valley heavyweights—would get tokens at a steep discount, then dump them on crypto exchanges to bilk retailers. More of those possible investors are now surfacing in court docs. As reported in CoinDesk, they may include:

QuadrigaCX

The law firm representing QuadrigaCX’s former users are nudging the RCMP to dig up the corpse of Gerald Cotten, the exchange’s dead CEO, to make sure it’s really him and not some random dead guy from India. Everybody is mouthing the word “exit scam,” and this is likely the easiest way to find out. Of course, if the body is exhumed and it’s not Cotten, you can expect a Netflix series soon. (My story in my blog.)

Also, Quadriga’s fifth trustees report is out. Basically, it says that big four accounting firm EY, the collapsed exchange’s court appointed trustee, spent half a million U.S. dollars on fulfilling law enforcement requests in the second half of 2019. The small pile of what’s left of Quadriga creditor’s money continues to shrink. (My story in my blog

Reggie Fowler and the mysterious sealed document

Alleged Bitfinex money mule Reginald Fowler was supposed to plead guilty to one count and have the other three counts dropped. But something weird happened when the Arizona businessman stepped before a New York judge on Jan. 17. According to Bloomberg, Fowler was supposed to surrender ~ $371 million in more than 50 accounts. The deal fell apart when he only agreed to forfeit whatever was in the accounts.

Now, according to a Jan. 31 court filing, the U.S. Government has officially withdrawn its plea offer. Nobody knows the full details of what happened that day, but a mysterious sealed document, which appeared in his court filings on Jan. 30, might contain some clues. His trial begins April 28. 

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Spammers gonna spam

In part two of “Decred fires its publicist because Ditto PR could not get the altcoin project a Wikipedia page” David Gerard, who happens to be a longtime Wikipedia administrator, fires back. He wrote an entire blog post calling Ditto out on their no-coiner conspiracy claims. (Ditto originally alluded to Gerard in saying that “a few influential no-coiners have admin power and are intentionally censoring crypto pages.”) He also wrote an article on Wikipedia Signpost, where he talks about the “ongoing firehose of spam” Wikipedia has had to put up with following the 2017 crypto bubble.

Wikipedia has set rules governing what stays up on the site and what gets taken down, and those rules have nothing to do with the site’s administrators. Ditto should know this, as opposed to hiding behind some mad-capped nocoiner conspiracy theory.

Bakkt is a ghost town

The hope was that bitcoin options would lure institution money into the space and send the price of bitcoin through the atmosphere. The unfortunate reality is that literally, no one is trading Bakkt’s bitcoin options. (The bitcoin futures exchange is governed by the Intercontinental Exchange, the owners of the New York Stock Exchange.)

In the last full trading week of January, not a single bitcoin options contract was traded on Bakkt, Coindesk reported. Bakkt launched the first regulated bitcoin options contract on Dec. 9, having rolled out a cash-settled futures and physically settled futures in November and September, respectively. 

Other news

Chainalysis released a report on criminal uses of cryptocurrency in 2019. As long as you overlook some of the marketing fluff—e.g., 60 million Americans bought bitcoin last year—there’s some interesting takeaways. Like the bit about how crooks seem to cash out their bitcoins via over-the-counter trades going through Binance and Huobi. And how, for the first time in Bitcoin’s history, black market sales in crypto surpassed $600 million last year. (See my story in Modern Consensus.)

There’s been more than one news report claiming coronavirus is good for bitcoin. This is utter nonsense. The reason the price of bitcoin goes wildly up and down is because the markets are thinly traded, making them easy to manipulate. Literally, every time there is a crisis happening somewhere in the world, bitcoiners claims that’s good for bitcoin. 

Far right website @Zerohedge had their Twitter account suspended. They always post wild stuff, but apparently, they crossed a line. Buzzfeed said the site claimed without evidence that a scientist at the Wuhan Institute of Virology created the strain of the virus that has led the World Health Organization to declare a global health emergency.  

Bitcoin core developer @LukeDashjr weirdly commented on Twitter that “Masturbation is a very grave sin, arguably even worse than murder.” I thought he was joking, but apparently, /r/buttcoin has an entire collection of his bizarre quotes.

(Updated Feb. 3 at 9 a.m. ET with a few more details on Fowler.)

 

 

 

 

 

 

US Government wants man at center of massive ‘cryptocurrency scheme’ held without bail

The U.S. government wants a football businessman linked to an investigation into $850 million of missing Tether and Bitfinex funds to be held without bail.

According to a memorandum in support of detention filed with the District Court of Arizona on May 1, Reginald Fowler poses a serious flight risk due to his overseas connections and access to hundreds of millions of dollars.

The court doc also presents startling new twists in an already tangled plot—a “Master US Workbook,” which details the financial operations of the “cryptocurrency scheme,” fake bond certificates worth billions of dollars, and a counterfeit money operation.

Reggie Fowler

Screen Shot 2019-05-02 at 1.33.58 PMFowler, 60, is a football businessman. He was a former co-owner of the Minnesota Vikings and the original main investor in the Alliance of American Football (AAF)—an attempt to form a new football league. The AAF collapsed when Fowler withdrew funding—after the Department of Justice froze his bank accounts in late 2018.

I did a search on Pacer and got a number of hits showing Fowler has been in and out of courts for years. In fact, in 2005, ESPN reported that he had been sued 36 times.

Most recently, Fowler was charged with bank fraud and operating an unlicensed money services business (MSB). These crimes relate to his alleged involvement in a “shadow bank” on behalf of cryptocurrency exchanges, in which hundreds of millions of dollars passed through accounts that he controlled in jurisdictions around the world. 

Fowler operated Global Trading Solutions LLC in the US, which provided services for Global Trade Solutions AG, the Zug, Switzerland-based parent company of Crypto Capital Corp, a third-party payment processor. At one time or another, Crypto Capital serviced QuadrigaCX, Bitfinex, Kraken, Binance, and BitMEX—some of the top crypto exchanges.

In October and November 2018, five US bank accounts were frozen—three of them were Fowler’s personal accounts and two were held under Global Trading Solutions. On April 11, Fowler was indicted in the Southern District of New York. And on April 30, he was arrested in Chandler, Arizona, where he lives. 

Fowler is looking at spending the rest of his life in prison—the bank fraud counts alone carry a maximum sentence of 30 years. 

The cryptocurrency scheme was not limited to the US. Fowler set up bank accounts around the world and coordinated the scheme with co-conspirators in Israel, Switzerland, and Canada. The scheme involves a “staggering amount of money,” and the government believes that Fowler still has access to overseas bank accounts.  

Master US Workbook

Even more revealing, via email search warrants, the government has obtained a document entitled “Master US Workbook,” which details the operations of the scheme. The workbook lists 60 bank accounts. It shows the scheme received over $740 million in 2018 alone. As of January 2019, the combined bank balance was $345 million. Approximately $50 million is held in US accounts. The rest is located overseas. 

Apparently, Fowler had “shown a willingness to help himself to these funds in the past.” In mid-2018, he sent $60 million from scheme accounts to his personal bank accounts. Scheme members set up a “10% fund” from client deposits, available for his personal use. The government does not know the location of those accounts.

After Fowler’s bank accounts were seized in October 2018, he agreed to cooperate with FBI agents and keep the investigation confidential, which he did not do. When agents sent him emails, he would share those with other scheme members.  

Other illegal activity

Fowler appears to have been involved with other illegal activities, such as wire fraud related to the 10% fund. He also tried to take out loans by presenting banks with fraudulent bond certificates worth billions of dollars. 

Even more shocking, FBI agents also found evidence that Fowler was involved in a counterfeit money operation. They found $14,000 in fake bills consisting of sheets of $100 bills in a filing cabinet in his Chandler, Arizona office.

After examining the sheets, a special agent for the US Secret Service “determined that they were undergoing a process common in counterfeiting schemes to turn paper bills into passable currency. In fact, the FBI also recovered black carbon paper from the office, which is often used as part of this process for making believable counterfeit bills.”

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