The cryptocurrency industry attracts a large amount of money, and with it, a fair share of fraudsters, scammers and ne’er-do-wells.
Many ascended to fame and fortune before the law caught up with them, while others fought their cases in court or simply fled.
There are also those who have been prosecuted but maintain their innocence, stating that they fell afoul of ignorant regulators who willfully misinterpreted their actions as malicious.
Here are seven notable figures in crypto who swapped dinner suits for jumpsuits… and one who got away.
Sam Bankman-Fried
Not so long ago, Sam Bankman-Fried was the golden boy of crypto. His face was on the front cover of Forbes and Fortune magazines; he rubbed shoulders with the rich and famous and was politically well-connected.
As CEO of FTX, a crypto exchange valued at $32 billion, Bankman-Fried had both status and power.
However, he did not have a responsible and prudent approach to financial management, a flaw that would prove to be his undoing.
In November 2022, FTX collapsed amid wider market turmoil, insufficient liquidity and questions about the role and funding of its sister firm, Alameda Research.
The post-mortem revealed that Bankman-Fried treated customers’ funds as though they were his own, dipping into them as and when he pleased.
Co-mingling funds between FTX and Alameda Research was also common practice.
FTX had been so good at making money that Bankman-Fried appeared to believe it would never run out or that he could always make more to cover any fraudulent activity. He paid dearly for his hubris.
On Nov. 2, 2023, Bankman-Fried was found guilty of seven counts of wire fraud and conspiracy to launder money. He is currently serving a 25-year sentence.
Ross Ulbricht
From 2011 to 2013, Ross Ulbricht ran the darknet marketplace Silk Road under the pseudonym “Dread Pirate Roberts.”
Silk Road allowed users to trade in various goods and services in exchange for Bitcoin (BTC), helping to popularize the cryptocurrency in its earliest days.
But the goods and services on Silk Road were largely illegal, including drugs, stolen credit cards, weapons and counterfeit documents.
Ulbricht argued that his motivation for creating Silk Road was ideological, that it created a market free from government overreach and overzealous law enforcement.
Law enforcement took a different view.
Ulbricht was detained at the Glen Park branch of the San Francisco Public Library on Oct. 1, 2013.
A non-violent first-time offender, he was sentenced to life imprisonment plus 40 years in May 2015.
That may not be the end of the story, however, as former President Donald Trump has promised to “commute the sentence of Ross Ulbricht to a sentence of time served” if reelected in 2024.
Source: Ross Ulbricht
Alexander Vinnik
Even among this list, the scale and scope of Alexander Vinnik’s criminal activities are quite extraordinary. Vinnik was one of the founders of BTC-e, a popular early centralized exchange he operated from 2011 to 2017.
Vinnik has been accused of a litany of crimes, including hacking, fraud, identity theft, tax refund fraud, public corruption, drug trafficking and money laundering. This made Vinnik one of the most sought-after men in the world.
He has spent time in French, Greek and United States jails so far.
Two associates of Vinnik, Alexander Verner and Alexey Bilyuchenko, were named as the culprits behind the theft of 950,000 BTC (worth $60 billion today) from Mt. Gox. Vinnik is said to have used BTC-e to launder the funds.
Vinnik was believed to be behind the ransomware “Locky” and the cybercriminal group “Fancy Bear,” which hacked computers belonging to the Democratic Party, but was acquitted by a French judge after the prosecution failed to prove their case.
Vinnik was arrested and detained by Greek authorities in 2017, where he survived an assassination attempt believed to be connected to the Russian criminal underworld.
In January 2020, Vinnik was extradited to France, where he was sentenced to five years imprisonment. In August 2022, he was extradited to the US. In May, Vinnik pleaded guilty to conspiracy to commit money laundering.
Vinnik has yet to be sentenced for his latest conviction.
John McAfee
John McAfee was a true American rebel long before blockchain emerged, but in the world of crypto, he was reborn as the ultimate maverick, a cult hero in spite of his many problems and crimes.
In 2009, McAfee sold his belongings and ventured to Belize after making millions from the sale of his anti-virus software — which was notorious for being as difficult to remove as an actual virus.
In Belize, McAfee hired his own police force, seven female entertainers and enough chemical stimulation to make Al Pacino’s antics in Scarface look amateur by comparison.
During the initial coin offering (ICO) mania, McAfee began to associate himself with various crypto projects with little apparent discrimination. The only thing that seems to have mattered to McAfee was whether they could pay him. The US Securities and Exchange Commission later said McAfee made $23 million from promoting these ICOs.
In 2017, McAfee publicly bet Bitcoin would reach $500,000 by 2020 or he would eat his own penis on television. He later upped the bet to $1 million — then $2 million. Naturally, he lost, but most people were more than happy for him to renege on his terms.
In later years, McAfee became increasingly troubled and erratic as US authorities sought to arrest him on charges of tax evasion, including using cryptocurrency exchange accounts to evade taxes.
In 2020, Spanish police caught up with McAfee and took him into custody.
Source: John McAfee
McAfee would never see freedom again. His life ended behind bars on June 23, 2021, the victim of an apparent suicide. He was 75 years old.
Alexey Pertsev
Alexey Pertsev, one of the founders and developers of the coin-mixing service Tornado Cash, was arrested in the Netherlands in August 2022 on suspicion of money laundering.
Crypto mixers allow users to “mix” their coins with others in an attempt to hide their source. Privacy advocates insist that mixers are legitimate services, whereas many regulators simply see them as tools for money laundering.
In May 2024, he was found guilty of laundering over $1 billion through Tornado Cash and was sentenced to a little over five years in jail.
He is currently appealing that verdict. Pertsev and many of his supporters argue that he should not be held responsible for those using Tornado Cash for illicit purposes.
Pertsev is fighting an uphill battle, as he was denied access to a computer to prepare for his defense.
Exactly two years after my arrest in Amsterdam, I’m back behind bars, appealing a 5-year sentence. This fight isn’t just about me; it’s about our privacy rights and the future of software developers.
Please join this legal battle and donate via Juicebox.
#freealexpertsev pic.twitter.com/NPCVf37bo6
— Alexey Pertsev (@alex_pertsev) August 10, 2024
In August 2024, an X account supporting Pertsev and his defense appealed to supporters to donate between $750,000 and $1 million, stating, “It’s time to take a stand with Alexey and fight for what’s right.”
Changpeng Zhao
Binance and its former CEO, Changpeng Zhao, had been on a collision course with US authorities for some time.
The US Commodity Futures Trading Commission and SEC were among those displeased with Zhao. The exchange and its leadership first ignored US rules and regulations and later applied them without enough enthusiasm and vigor to placate regulators.
In November last year, Binance and Zhao reached a settlement with US authorities. The exchange paid $4.3 billion in fines, and Zhao pleaded guilty to one felony charge of money laundering.
Zhao was sentenced to four months in prison in May. He is scheduled to be released on Sept. 29.
Zhao on May 4, 2023 referencing the internet meme “May the fourth be with you.” Source: Changpeng Zhao
And one who got away…
Ruja Ignatova
Dubbed the “Cryptoqueen,” Bulgarian Ruja Ignatova is alleged to have defrauded investors of over $4 billion through her Ponzi scheme, OneCoin.
Ignatova disappeared in 2017, when she was last seen in Athens, Greece. The US Federal Bureau of Investigation has put her on its notorious 10 Most Wanted list and is offering $5 million for any information that leads to her arrest.
Several claimed to have spied the “Cryptoqueen” in various exotic locations, but her whereabouts remain unknown to this day.
Her brother, Konstantin Ignatov, has pleaded guilty to money laundering and fraud charges related to OneCoin and was freed after three years for cooperating with US investigators and testifying against OneCoin lawyer Mark Scott in court.
Source: FBI
Scott is serving 17 years, while OneCoin co-founder Karl Greenwood was found guilty in 2023 and received a 20-year sentence for his role in the scheme.
Recent: Why is the SEC going after digital art and monkey pictures?
As of Aug. 7, the United Kingdom’s High Court of Justice issued a Worldwide Freezing Order against Ignatova.
Who’s next?
The current crop of crypto inmates could soon have company. Former Terraform Labs founder Do Kwon is facing charges in either the US or South Korea for securities fraud, commodities fraud, wire fraud and conspiracy. He is currently in Montenegro on bail.
Alex Mashinsky of Celsius faces charges of securities, commodities and wire fraud. His case is due to begin in September.
Bitcoin Cash advocate Roger Ver was arrested in Spain this April, and US authorities are currently seeking extradition. He is charged with mail fraud, tax evasion and filing false tax returns.
