CEO Indicted on 9 Counts for Defrauding Crypto Investors

  • Patrick McDonnell, owner of alleged investment firm Cabbage Tech, was charged with wire fraud, according to a press release from the Department of Justice.
  • As per the report, investors were duped out of $194,000 in cash, 4.41 Bitcoin (worth $17,551), 206 Litecoin ($12,215), 620 Ethereum Classic ($2,914) and 1,342,634 Verge (9,035) in total.
A judge's gavel

Patrick McDonnell, owner of alleged investment firm Cabbage Tech, was charged with wire fraud, according to a press release from the Department of Justice.

As per the press release, McDonnell, also known as “Jason Flack”, was charged with nine counts of wire fraud and was arrested on March 26, in relation to an alleged plan to defraud cryptocurrency investors. Richard P. Donoghue, a United States Attorney for the Eastern District of New York, said in the press release:

“As alleged, the defendant defrauded investors by making false promises and sending them fraudulent balance statements, hiding the fact that he was stealing their money for his personal use. The defendant’s fraud ends now, he will be held responsible for his criminal conduct.”

McDonnell portrayed himself as an experienced crypto trader between November 2014 and January 2018, offering customers to buy and trade cryptocurrency on their behalf, and promising to provide them with trading advice. He reportedly used his company Cabbage Tech Corp, also known as Coin Drop Markets, to ask for investments through social media, such as Facebook and Twitter.

According to the statement, neither McDonnell nor Cabbage Tech provided investment services, instead clients received falsified balance records, stating that their investments were profitable. When customers requested to withdraw their funds, McDonnell first made excuses for delaying their repayment, and then stopped responding altogether.

As per the report, investors were duped out of $194,000 in cash, 4.41 Bitcoin (worth $17,551), 206 Litecoin ($12,215), 620 Ethereum Classic ($2,914) and 1,342,634 Verge (9,035) in total. If found guilty, McDonnell faces a maximum of 20 years in prison.

The Commodity Futures Trading Commission won a court order to permanently ban McDonnell back in August of last year, when a judge ruled that he was operating a “boiler room” to defraud investors, and ordered him to pay $290,429 in restitution and $871,287 in penalties. McDonnell was not represented by a lawyer at the time, citing his inability to pay for the counsel.

Discussion
Related Coverage
Sam Bankman-Fried Found Guilty on All Charges
  • The New York Jurors took 4 fours of deliberating before pronouncing the former FTX CEO guilty of all seven charges of fraud and conspiracy to commit fraud.
  • Bankman-Fried will now have to appear in court on 28 March, 2024, where he will face a potential maximum sentence of 115 years in prison.
November 3, 2023, 8:54 AM
sbf

Former CEO of FTX Sam Bankman-Fried leaves the Federal Court in New York after pleading not guilty, 3 January, 2022.
lev radin/Shutterstock

Celsius Seeks Court Approval on Restructuring Plan
  • The bankrupt crypto lender said that if its reorganization plan is approved, it is ready to start repaying its customers using $2 billion in BTC and ETH by the end of the year.
  • If given the green light, Celsius will restart its business under the “NewCo” brand without any funded debt, and with seed funding of up to $450 million.
DoJ Requests SBF’s Expert Witnesses be Barred From Testifying
  • The U.S. Department of Justice has expressed its concerns over Sam Bankman-Fried’s seven expert witnesses, and requested they be barred from testifying on the case.
  • The DoJ claimed most of the proposed experts lacked the necessary foundation for their opinions, making them unqualified to be an expert witness.