Friday, December 1, 2023

UPDATE: Former Corrections Officer Charged with Bilking $620K from First Responders in Crypto Scheme; New Info Added

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By Herald Staff

CORRECTION: The below article incorrectly stated that DeSalvo is a Marmora resident. He currently resides in Linwood and is a former resident of Marmora, according to a release from the New Jersey Office of the Attorney General that was issued after the U.S. Attorney’s Office – District of New Jersey’s release.

NEWARK – A former New Jersey corrections officer was arrested Aug. 23 for orchestrating two different fraud schemes that targeted police, fire, and other first responders, including a cryptocurrency scheme that resulted in losses of more than $600,000, U.S. Attorney for the District of New Jersey Philip R. Sellinger said.

Agents of the FBI arrested John DeSalvo, 47, of Linwood, a former Marmora resident, who is charged with two counts of wire fraud, two counts of securities fraud, and two counts of money laundering related to the two fraud schemes. He was scheduled to appear on Wednesday (Aug. 23) before U.S. Magistrate Judge André M. Espinosa in Newark federal court. DeSalvo faces additional charges of second-degree theft by deception and fourth-degree business practices.

“This defendant, a former New Jersey corrections officer, is alleged to have committed two brazen investment fraud schemes in which he falsely promised huge returns to obtain hundreds of thousands of dollars from unsuspecting investors,” Sellinger said. “In one scheme, DeSalvo is alleged to have targeted law enforcement and first responders to invest in a digital token that he falsely claimed was SEC (U.S. Securities and Exchange Commission)-approved and listed on cryptocurrency exchanges.”

Sellinger said that in the other scheme, DeSalvo, who retired from the state Department of Corrections May 1, 2010, is “alleged to have obtained investments by promising extraordinary rates of return that we allege were too good to be true.”

“Once DeSalvo got his investors’ money, he is alleged to have spent it on himself, paying personal expenses and funding his own investments,” Sellinger said.

FBI-Newark Special Agent in Charge James E. Dennehy said the FBI alleges DeSalvo created and marketed a cryptocurrency to first responders as a “crypto pension” that could supplement their existing pensions.

“Our investigation shows instead of actually making the rate of return he boasted about, he allegedly used hard-earned money from firefighters, police officers, EMTs, and other public servants as his personal bank account,” Dennehy said. “We are asking anyone who may believe they are a victim of DeSalvo to please reach out to the FBI at 1-800-CALL-FBI.”

According to a press release filed by the U.S. Attorney’s Office – District of New Jersey, documents filed in this case and statements made in court said DeSalvo was the creator and promoter of a digital token known as “Blazar Token,” which DeSalvo marketed to police, fire personnel, EMTs, and other first responders as a “crypto pension” that could be used to supplement investors’ existing pension plans.

DeSalvo allegedly began marketing the cryptocurrency in late 2021 and guaranteed investors rates of return of more than 20% with “ZERO risk.” DeSalvo raised more than $620,000 from more than 200 investors in Blazar.

In May 2022, DeSalvo sold off more than 41 billion of his own Blazar tokens, which caused the price of the token to drop precipitously. The value of Blazar never recovered, causing most investors to lose their entire investments.

The press release continued, saying, between January 2021 and May 2021, DeSalvo managed and solicited investment in an investment group through Brokerage-1, again, marketed largely through social media posts.

DeSalvo allegedly claimed to potential investors, “I have been averaging close to 1,200% over the last 2 years. I am in the top 1,000th percent in the world. That’s the truth, the return rates I have been averaging are so high that I have people throwing money at me to invest.”

Sellinger said DeSalvo solicited approximately $100,000 in investments from approximately 20 individuals and later transferred all the funds out of the investment group’s account at Brokerage-1 and into personal accounts held by DeSalvo at Brokerage-1 and Coinbase, using the funds for credit card payments, personal trading in volatile cryptocurrencies, and payments to a contractor who performed work on DeSalvo’s personal residence.

DeSalvo is facing 20 years in prison for each of the counts of wire fraud, securities fraud, and money laundering, and fines of $250,000 for wire fraud, $5 million for securities fraud, and $500,000 for money laundering.

The SEC also filed a civil complaint, Aug. 23, against DeSalvo based on the same conduct.

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