Over 70,000 victims lost $147 million in Gemcoins – the cryptocurrency that never was.

There may be hope yet that the victims of the elaborate fraud committed by Steve Chen and co-conspirators could get restitution. Chen, the 62-year old mastermind of the scam, has confessed to having fraudulently fleeced $147 million from victims of his Gemcoin cryptocurrency scheme. (CoinTelegraph)

In a plea agreement, Chen owned up to wire fraud and tax evasion. Furthermore, he admitted that he pocketed $4.8 million in profits during 2014, though he reported only $138,000.

According to the authorities, Chen splurged his ill-gotten gains on homes and gambling.

How the scam worked

According to the DOJ, Chen launched and promoted U.S. Fine Investment Arts (USFIA), a company based in Arcadia, California. Through an MLM scheme, the company first assigned reward points and then the Gemcoin digital currency to gullible investors.  The company claimed to back the crypto-currency by gemstones which it produced from its mines. However, no such mines or gemstones existed.

Moreover, in their multi-level scheme, the fraudsters offered bonuses, including cash, luxury cars, homes in the Los Angeles area, and EB-5 visas to investors who recruited new entrants to the scheme.

“Mr. Chen lured victim investors around the globe by creating a mirage made of fashionable cryptocurrency features and dynamic marketing tactics,” said Paul Delacourt, the assistant director of the Federal Bureau of Investigation’s Los Angeles Field Office.

Crime doesn’t pay

Chen is on the hook for a fine of a minimum of $500,000, full compensation to all victims and a prison sentence of 10 years.

U.S. Attorney Nick Hanna said in a statement:

“Mr. Chen’s promises to investors were as worthless as his non-existent mines and phony digital currency. This case should remind all investors that trappings of success may convey legitimacy, but everyone should exercise extreme care when considering giving hard-earned money to any outfit promoting trendy products and extravagant profits.”

A receiver has been appointed by a court in that matter and maintains a website for victims at http://usfiareceiver.com/.

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