Former Banker Pleads Guilty to Crypto Fraud, Sentenced to 41 Months

Rashawn Russell, a former Deutsche Bank executive, was sentenced to 41 months in prison on May 31 in Eastern New York District Court, Brooklyn. 

Russell was charged with wire fraud through a crypto scheme and unrelated access device fraud. He had previously pleaded guilty to the charges in September 2023. 

Detailing the Fraudulent Scheme

The Justice Department (DOJ) reported that Russell orchestrated a fraudulent investment fund known as the R3 Crypto Fund, which operated from November 2020 to August 2022.

The fund promised investors significant returns on their investments. However, instead of investing the money as promised, Russell diverted the funds for personal use. He used money from later investors to pay back earlycomers, creating a classic Ponzi scheme.

Besides that, he also misled investors by falsely claiming to have wired repayment funds when requested.

Russel’s fraudulent activities were revealed when prosecutors charged him with wire fraud related to the crypto scheme in April 2023. The former banker admitted to all charges in September, leading to his sentencing.

Russell’s case is part of a wider crackdown on cryptocurrency-related frauds, reflecting the growing scrutiny of such cases in the digital asset space. Over the past two months, several other individuals have been convicted or charged with similar crimes.

A good example occurred on May 18, when Thomas John Sfraga pleaded guilty to wire fraud involving a fake crypto wallet. He was also involved in other schemes designed to deceive investors.

Notably, on the same day, two individuals were arrested for money laundering on seven counts. Both acts were linked to a $73 million worth of “pig-butchering” crypto scam.

Another scenario was the case of Anton and James Peraire-Bueno. On May 15, the DOJ charged the brothers with conspiracy to commit money laundering and wire fraud. They were accused of manipulating the Ethereum blockchain to fraudulently profit from it.

In another case, on April 12, Shakeeb Ahmed, a computer security engineer, was sentenced to three years in prison.

His sentence was followed by three years of supervised release for executing flash loan attacks on digital asset exchanges in 2022. The Southern New York District Court handled this case.

Fraudulent Crypto Trend

Meanwhile, the trend in fraudulent activities appears to be dwindling this year, according to a May 30 report from blockchain security firm Immunefi. The report showed that crypto losses from fraud and hacks decreased by 12% compared to the previous year.

As of May 2024, the total losses amounted to $52 million, down from over $59 million in May of the previous year. Additionally, this figure shows a 28% decline compared to the losses reported in April.

The report further highlights a continuing trend of decreasing losses from hacks and crypto fraud in the Web3 industry. Earlier in March, Immunefi published a report indicating that losses in the first quarter of 2024 had decreased by 23% compared to the previous year.