Tech
‘It Was Just a Facade’: CEO Accused of Stealing $150M in Cryptocurrency Scam
The telling warning for investors in crypto-investment platform USI Tech should have been when its CEO, Horst Jicha, told them: “Now you might think this is too good to be true.”
Federal prosecutors say that was exactly what happened, and that Jicha’s proposed cryptocurrency investment strategy, which promised 1% returns every day, was actually a scam.
The house of cards came crashing down in 2018, when several state and provincial regulators in the U.S. and Canada issued cease-and-desist letters to USI Tech, saying it was selling unregistered securities and violating a host of financial regulations. But instead of returning investors’ money, prosecutors said, Jicha quickly transferred $150 million to accounts he controlled overseas.
For the next five years, Jicha, a 64-year-old German citizen, lived abroad. He was arrested on a sealed indictment shortly before Christmas when he tried to fly to Miami for a vacation, prosecutors said.
“In the early days of cryptocurrency, the defendant implemented a multi-level marketing scheme to defraud U.S. investors who were enthusiastic about the cryptocurrency market,” Breon Peace, U.S. Attorney for the Eastern District of New York, said in a statement. “Although the defendant did not return to the United States for half a decade, my office and the FBI worked to ensure that when he did, he would be brought to justice.”
In the same statement, James Smith, deputy director in charge of the FBI’s New York office, said: “Horst Jicha allegedly advertised a platform that made investing in cryptocurrencies simple and more accessible to investors, with guaranteed returns. In reality, the platform was just a front.”
Jicha was scheduled to appear in federal court in Brooklyn on Friday on charges of securities fraud, conspiracy to commit securities fraud, wire fraud and money laundering.
In a statement, Jicha’s lawyers, Marissel Descalzo and David Tarras, said the case was more complicated than prosecutors claimed and suggested others had played a more significant role.
“It is always difficult when investors have suffered losses at the hands of certain bad actors. We look forward to vigorously defending the allegations against Mr. Jicha and bringing to light the facts of his involvement with USI Tech in the hope that the bad actors will be brought to justice,” they said.
According to court documents, Jicha launched the USI Tech investment scheme in Dubai in 2017, pitching it as a way for both novice and experienced investors to tap into the market for new cryptocurrencies that were gaining popularity and skyrocketing in price.
The alleged strategy was simple: People could invest in so-called Bitcoin packages worth 50 euros each that, within 140 days, would produce a return of 140%, or 1% per day. In promotional materials, Jicha never provided a clear explanation of how USI Tech produced those returns, other than nonspecific references to cryptocurrency mining and algorithms, prosecutors said.
USI Tech initially operated primarily overseas, but later in 2017 Jicha launched its operations in North America with a marketing offensive and self-hosted promotional seminars across the country, according to court documents.
When some potential investors asked whether USI Tech was a Ponzi scheme, Jicha and other executives assured them it was not and said they had consulted with regulators and Securities and Exchange Commission compliance attorneys to ensure their scheme was fully legal.
According to prosecutors, part of the proposal included offering substantial commissions to customers who brought other investors to the platform.
Within a year, USI Tech had brought in tens of millions of dollars in investment and attracted the attention of regulators in Texas, North Carolina and several Canadian provinces, who told executives that what they were doing was illegal, according to court documents.
As a result, prosecutors say, Jicha chose to shut down USI Tech’s U.S. operations. He initially told investors he was working on ways to get the platform up and running again. But soon after, prosecutors say, he simply disappeared with the $150 million.
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