The mastermind behind the “epic proportions” GemCoin crypto scheme has been sentenced to 10 years in federal prison, according to the U.S. Attorney’s Office for the Central District of California.
Steve Chen unlawfully obtained $147 million from thousands of investors who became victims of its fraudulent GemCoin crypto scheme.
He was sentenced to prison by U.S. District Judge John F. Walter., who found that he promoted a massive scam using a “litany of lies.”
In addition to serving in prison, Judge Walters also ordered Chen to pay restitution of $1,885,094 to the Internal Revenue Service (IRS).
The GemCoin crypto scheme mastermind is also known as “Li Chen” and “Boss.” He was the owner and CEO of U.S. Fine Investment Arts Inc. (UFSIA) and six other companies.
How did Chen lure investors to his GemCoin crypto scheme?
Chen deceived 72,000 investors by falsely promoting USFIA as a successful multi-level marketing company. He told investors that his firm extracts amber and other gemstones from mines it owns in the United States, the Dominican Republic, Argentina, and Mexico. In reality, his company does not own any mine. The mines he was telling investors were non-existent.
He lured investors into acquiring USFIA investment packages worth between $1,000 and $30,000 each. The packages supposedly included amber and other gemstones as well as points, which are convertible to USFIA shares when the company launched its initial public offering (IPO). However, Chen had no intention for a public offering of his company.
He also convinced investors by offering other bonuses including cash, travel, luxury cars, homes in the Los Angeles area to investors who recruited other people to purchase these “packages.” He also offered EB-5 visas as bonuses for immigrant investors.
In September 2014, the GemCoin crypto scheme mastermind and his co-conspirators started changing their promotions. Instead of points, they promoted Gem Coins as a legitimate cryptocurrency purportedly backed by USFIA’s gemstone holdings. Chen falsely told consumers that the Gem Coins were widely circulated in the finance and jewelry industries.
In June 2020, Chen pleaded guilty to one count of conspiracy to commit wire fraud and one count of tax evasion. He declared a gross income of $138,015 for 2014 when his actual income was around $4,816,193 that year.
In their sentencing memorandum, prosecutors wrote that Chen “promoted his Pyramid/Ponzi scam using a multi-level marketing program in which compensation for recruiting other investors primarily came from new USFIA investors’ payments.”
The prosecutors added, “Because the primary focus was on recruiting other investors, rather than selling USFIA products to retail customers, the vast majority of investors were destined to lose money – while making [Chen] very wealthy.”
The case is similar to that of Stefan Qin, CEO of Virgil Capital who allegedly told investors that he will use their money for cryptocurrency trading based on a proprietary algorithm, while he was using the money to make high-risk investments.
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