On Tuesday, the federal court in Brooklyn sentenced John DeMarr to 60 months in prison for his role in a multi-million dollar cryptocurrency and securities fraud scheme. The sentencing came after DeMarr pled guilty to one count of conspiracy to commit securities fraud in July 2021.

Additionally, the court ordered DeMarr to pay more than $3.5 million in damages along with the prison sentence.

StarOptions and B2G Promoter Gets 60 Months in Jail

According to the court documents, DeMarr was a promoter of several digital asset-related companies. He conspired with others to defraud investors by luring them to their companies, Start Options and B2G, with false and misleading representations.

They promoted Star Options as an online investment platform that provides cryptocurrency mining, trading, and digital asset trading services. At the same time, B2G was touted as an 'ecosystem' allowing users to trade B2G tokens, offer staking , and trade digital and fiat currencies. Both these platforms were fraudulent, the US Department of Justice highlighted.

Another Too Good to Be True Scheme

DeMarr and his co-conspirators falsely claimed that the investors' funds would be invested in digital asset mining and trading platforms, earning massive profits. They even paid for celebrity endorsements. One unnamed actor famous for martial arts films made in the 1980s and 1990s even became a promoter and celebrity spokesperson of the scheme and falsely claimed that B2G could generate an 8,000 percent return in one year. Further, the perpetrators used other celebrity endorsements to promote Start Options.

However, in reality, none of the investor funds was invested. Instead, the perpetrators diverted the funds into their own accounts and used them for personal expenses and purchasing luxury items, including cars and jewellery.

"DeMarr took advantage of those who trusted him, persuading them to double down on their investments when he knew that his cryptocurrency companies and their dubious celebrity endorsements were scams being used to fund his lavish lifestyle," said Breon Peace, US Attorney for the Eastern District of New York.

"The victims ultimately lost everything, so it is appropriate that DeMarr lose his freedom for concocting this fraud."

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The Rise in Crypto Scams

The growing popularity of cryptocurrencies has also encouraged fraudsters to up their efforts in scamming investors. The number of scam tokens has risen exponentially over the years. According to a Solidus Labs report, 125,084 scam tokens were deployed last year compared to only 83,368 in the previous year.

Further, data from the UK police revealed that cryptocurrency frauds in the country jumped by 32 percent between October 2021 and September 2022 to £226 million. Meanwhile, the UK court recently sent four individuals to prison for 15 years for their role in causing a loss of £21 million to an Australian cryptocurrency exchange.