Cryptocurrency Founder Charged With Avoiding Tax to Buy Yachts and Homes

Two U.S. government agencies are taking action against the founder of a cryptocurrency project who allegedly pulled an exit scam and avoided taxes while spending the proceeds on a lavish lifestyle.

According to an indictment filed in the U.S. Southern District Court of New York and unsealed on Wednesday, the Internal Revenue Service (IRS) has charged Amir Bruno Elmaani, a.k.a. “Bruno Brock,” on two counts of tax evasion.

Elmaani, who created a blockchain protocol called Oyster Pearl, is alleged to have made “millions of dollars” from an initial coin offering of its pearl (PRL) cryptocurrency in 2017. Those tokens were purportedly to be used for the purchase of online data storage that fueled Oyster protocol.

Rather than reporting the income earned from the sales to the IRS, Elmaani allegedly falsified his 2017 tax return and failed to file one in 2018, instead pocketing the millions.

“As it turns out, Elmaani was funneling the proceeds of his alleged cryptocurrency scheme through a shell company that hid the true nature of his financial interests,” said William Sweeney Jr, the FBI’s assistant director in a Department of Justice statement.

According to the indictment, Elmaani used $10 million in proceeds to buy multiple yachts (where he stored gold bars), real estate and home renovations, as well as spending $1.6 million at a carbon-fiber composite company.

The maximum penalty of a criminal charge for tax evasion carries a maximum of five years per count, meaning Elmaani could be facing up to 10 years in a federal prison.

Meanwhile, the Securities and Exchange Commission (SEC) filed a separate civil action against Elmaani on Wednesday.

He is charged with conducting an illegal securities offering of PRL tokens and profiting from “minting millions of unauthorized tokens for himself at no cost and selling them into the secondary market, thereby causing the value of others’ tokens to plummet.”

The exit scam

Beginning October 2018, Elmaani – operating under his pseudonym Bruno Brock – exploited a smart contract on the Ethereum blockchain to create new tokens to be sold at a below-market price before creating new ones for himself for free.

At the time, Elmaani said he was retaining millions of PRL in accordance with his “founders share” and in the process claimed he had to move his PRL tokens to a different wallet in order to avoid double taxation, per the DoJ indictment.

By inflating the fixed supply of PRL through his access to the protocol, it’s claimed Elmaani was able to convert his newly minted PRL tokens to other cryptocurrencies using a “foreign-based exchange.” After discovering the alleged foul play, the exchange ceased all trading for PRL which left investors holding bags of essentially worthless tokens.

The SEC said, “Elmaani made approximately $570,000 in illicit gains through the minting and sale of Pearl tokens and, as a result of his sales, the price of Pearl tokens fell by nearly 65%, resulting in significant losses for investors.”

Elmaani used a coin mixer – a service designed to conceal the true origin or destination of cryptocurrencies on a given blockchain – before transferring funds to family members and friends, after which he transferred them to his own accounts, according to DoJ.

“The underlying scheme was old-fashioned fraud and tax evasion,” said Audrey Strauss, acting Manhattan U.S. attorney. “Thanks to the FBI and IRS Criminal Investigation Division, Elmaani is now in custody and facing federal prosecution.”