Ex-Beverly Hills Lawyer Ordered to Pay $14M for Crypto Ponzi Scheme

TLDR

• 85-year-old disbarred Beverly Hills attorney ordered to pay $14M for $9.5M crypto Ponzi scheme
• David Kagel pleaded guilty to conspiracy to commit fraud
• Kagel misled investors with fake security letters and false escrow claims
• Two co-conspirators await trial for related investment schemes
• Over 10,000 people lost $46.7M to crypto phishing scams in September 2023

A federal judge has ordered David Kagel, an 85-year-old disbarred attorney from Beverly Hills, to pay $14 million in restitution for his role in a $9.5 million cryptocurrency Ponzi scheme.

The ruling, handed down by U.S. District Judge Gloria Navarro in Las Vegas, comes after Kagel pleaded guilty to one count of conspiracy to commit fraud in May.

Kagel, who received a sentence of five years probation along with the hefty restitution order, played a key role in promoting the fraudulent investment scheme.

As a practicing attorney at the time, he issued letters on his firm’s letterhead that gave victims a false sense of security and legitimacy. These letters led many people to invest their money under false pretenses.

The scheme exploited investors’ trust by claiming to use trading bots for cryptocurrency investments.

Kagel further misled victims by falsely claiming to hold $11 million in escrow, which he said guaranteed the safety of their investments. In reality, there was no such protection.

Kagel’s involvement in the scheme had serious consequences for his legal career. In 2023, the California Supreme Court revoked his license after he failed to address disciplinary charges.

Records show that he had misappropriated $25,000 in client funds to further the Ponzi scheme.

Instead of investing the victims’ money as promised, Kagel used it for personal luxuries. Court filings reveal that he spent the funds on a private chef, security service, private jet, luxury hotel stays, and a private residence.

This misuse of funds demonstrates how the trust and financial security of his clients were sacrificed for his lavish lifestyle.

The crypto investment schemes promoted by Kagel and his co-conspirators promised high returns that were never delivered. These programs were carefully designed to attract investors and take advantage of their desire for financial growth.

Tyler Hatcher, a special agent in charge of the IRS Criminal Investigation, commented on the case in May, saying,

“Kagel preyed on trusting individuals through a complex scheme to separate people from their hard-earned money.”

Hatcher praised the thorough work of IRS investigators in tracking the money trail to build a strong case against the guilty party.

The investigation extended beyond Kagel to include two other individuals: David Gilbert Saffron, an Australian national, and Vincent Anthony Mazzotta Jr. from Los Angeles.

Both co-conspirators have pleaded not guilty and are awaiting trial in federal court in Los Angeles. Saffron and Mazzotta allegedly promoted investment schemes under various names, including Bitcoin Wealth Management, Cloud9 Capital, Circle Society, Omicron Trust, and Mind Capital.

According to a U.S. Department of Justice press release from May 29, these Ponzi schemes operated under multiple names to create the illusion of diverse, high-yield investment opportunities.

In reality, they were carefully orchestrated scams designed to enrich the conspirators at the expense of their victims.

The crypto fraud landscape extends far beyond this single case. Scam Sniffer, a Web3 anti-scam platform, reported that in September alone, more than 10,000 people lost over $46 million to various crypto phishing scams.

🚨 ScamSniffer September Phishing Report
In September, around 10K victims lost approximately $46 million to crypto phishing scams.

In Q3 2024, phishing losses totaled $127 million with an average of 11K victims per month. Two major victims accounted for $87 million. 💸

🧵 [1/8] pic.twitter.com/T2OpXQ8Cqb

— Scam Sniffer | Web3 Anti-Scam (@realScamSniffer) October 4, 2024

Specifically, 10,805 individuals lost $46.7 million due to these fraudulent activities last month.

The case against Kagel and his co-conspirators highlights the ongoing risks in the cryptocurrency investment space.

It serves as a reminder for potential investors to exercise caution and conduct thorough research before committing funds to any investment opportunity, particularly those promising unusually high returns.