RegulationFebruary 10, 2020

Crypto Ponzi Scheme Took Millions from over 100 Investors

The alleged victims included former MLB players, their families, and senior citizens.

Reported by Michael Katz

The US Secret Service has arrested two men and charged them with defrauding more than 100 investors, including former Major League Baseball players and their families, in an alleged scheme involving a fake cryptocurrency investment firm.

John Caruso, 28, and Zachary Salter, 27, both of the Phoenix area, were charged with conspiracy to commit wire fraud and money laundering. Caruso is the founder of Zima Digital Assets, a purported blockchain and cryptocurrency investment firm at the center of the alleged crimes that authorities say was a Ponzi scheme.

According to the legal complaint, Zima Digital Assets was represented by the two men as a hedge fund, but, based on financial records, there was no evidence that any of the investment funds provided to Caruso and Salter went to any digital asset investment, or to any investment of any kind.

“It has clearly been determined that the funds provided to Zima Digital Assets have been consistently spent to fund the extravagant lifestyles of Caruso, Salter, and their associates,” according to the complaint, which added that “throughout this scheme, there has been no observed legitimate source of income for Caruso or Salter.”

According to Secret Service agents, the two men were seen in possession of luxury vehicles such as Lamborghinis, Rolls Royces, McLarens, Ferraris, and an Aston Martin. And based on the analysis of a forensic accountant, Caruso and Salter spent at least $350,000 in luxury car rentals between March 2018 and August 2019.

Bank records also indicated that the two made large expenditures in Las Vegas casinos. Pursuant to a subpoena issued to MGM Grand, which owns several Las Vegas hotels and casinos, it was determined that over a little more than a year, Caruso and an unidentified woman made about 30 trips to Las Vegas and lost more than $1.4 million at MGM properties, with an average bet of approximately $5,000 at table games.

The complaint also noted that “numerous victims in this investigation have been identified as former MLB players and their families” and that “some of the believed investors appear to be senior citizens.” It also said that because Zima Digital Assets is still actively taking investments, the total amount of money lost by investors is unknown.

Caruso is no stranger to run-ins with the law. According to a background check with the National Crime Information Center, the Secret Service found that he has an “extensive criminal history regarding fraud and financial crimes.” This includes being arrested for providing false identification to law enforcement officers in California, for extortion charges in Florida, and for fraud schemes, assisting a criminal syndicate, money laundering, and use of an electronic communication device in a drug transaction in Arizona.