According to a press statement published by the U.S. Department of Justice (DoJ), Jeremy Spence aka ‘Coin Signals,’ committed commodities fraud and wire fraud.

Defrauding investors

The 24-year-old Rhode Island trader operated several cryptocurrency funds and allegedly defrauded more than 170 investors of digital assets worth more than $5 million after making false representations in connection with the cryptocurrency funds in question.

He was arrested on Jan. 26 in Rhode Island, the smallest U.S. state by area.  Spence promised investors that they would get a return of 148% on their investment. However, he fell short of his target and also lost some money.

“Jeremy Spence, a/k/a, ‘Coin Signals,’ allegedly lured investors to his cryptocurrency investment scam by touting returns of up to 148%.  Spence’s investments not only failed to reach his audacious claims, they consistently lost money, leaving a $5 million void in his clients’ crypto accounts,” said Manhattan U.S. Attorney General Audrey Strauss.

Alleged cryptocurrency funds

Spence is alleged to have carried out his fraudulent scheme from November 2017 through April 2019 and solicited investors for the investment pools he created and managed. 

Coin Signals Bitmex Fund, also known as ‘CS Mex Fund’ was the largest fund and the others included Coin Signals Alternative Fund, aka the CS Alt Fund, and the Coin Signals Long Term Fund.

Spence required investors to transfer cryptocurrencies such as Bitcoin and Ethereum to him so that they could participate in a Fund.

Strauss says the fraudulent investment scheme shows that people should not invest blindly without gaining an understanding of the cryptocurrency ecosystem.

“Spence’s alleged conduct should strongly signal would-be investors to thoroughly educate themselves in the cryptocurrency ecosystem before falling prey to investment scams promising huge returns for small investments that are indeed too good to be true,” said Strauss.

The hallmark of a Ponzi scheme

Spence was less successful in his trading than he presented to investors and on Jan. 28, 2018, he posted a message on an online group falsely claiming that he made profits of more than 148%, prompting investors to transfer additional funds to him.

The trader used funds from new investors to pay off other investors in an effort to keep the wheel of his investment scheme turning. He paid off $2 million to some of the investors using money deposited into the fund.

He faces a maximum of 30 years in prison of convicted of both charges.