Amir Elmaani, the 31-year-old founder of Oyster Protocol, was sentenced to a maximum of four years in prison for tax evasion.

In Tuesday's announcement, the United States Attorney's Office said that Elmaani, also known by the pseudonym “Bruno Block,” received the sentence after pleading guilty on April 6.

As part of his guilty plea, he admitted to creating and selling Pearl tokens without paying taxes on the huge profits made from the project.

Elmaani admitted causing tax losses exceeding $5.5 million.

“Amir Elmaani violated his obligation to pay taxes on millions of dollars in cryptocurrency profits, and he also violated investors' trust in the cryptocurrency he founded,” District Attorney Damian Williams said in a comment.

“Participants in the cryptocurrency markets must act within the rules, and this Office will be relentless in prosecuting those who do not.”

Elmaani's fraudulent activities began in September and October 2017 when he was actively promoting a cryptocurrency called Pearl (PRL).

The digital asset is marketed as a means for investors to obtain data on Oyster Protocol, a blockchain-based data storage platform.

Elmaani Uses Smart Contracts to Mint New PRL Tokens Before Dumping Them

In October 2018, Elmaani quietly minted a large number of new PRL tokens and then dumped them on the market.

“On or about October 29, 2018, I used a smart contract to create a new PRL, without notifying anyone, including other people working on the Oyster Protocol project,” he said in his statement of defense.

"I then sell this new PRL on a digital trading platform."

He further admitted that parties purchasing these newly minted PRL tokens were likely unaware of the increase in total supply.

Despite making huge profits from this exit scheme, Elmaani filed a tax return in 2017 claiming income of $15,000 from the patent design business.

Furthermore, he reported zero income to the tax authorities in 2018.

However, investigations revealed that in 2018, Elmaani spent more than $10 million on several yachts, $1.6 million on a carbon fiber composite company, large amounts of money at home improvement stores, and more than $700,000 on the acquisition of two homes.

One property was purchased through a shell company, while the other property was registered in the names of two of Elmaani's associates.

Prosecutors also found that Elmaani was extensively involved in trading precious metals and kept gold bullion in a safe on one of his yachts.

Prosecutors further revealed that Elmaani hired friends and family as recruits to receive cryptocurrency proceeds and transfer them or convert them into US currency, avoiding proper reporting and taxation.

In addition to the four years in prison, Elmaani was also sentenced to one year of supervised release and ordered to pay $5.5 million in restitution.