“Crypto king” John Caruso to stay detained pending trial, Court rules

John Michael Caruso, one of the operators of fraudulent cryptocurrency scheme Zima Digital Assets, has failed to have his detention reconsidered.

According to an Order signed by Magistrate Judge Michelle H Burns of the Arizona District Court on April 8, 2020, the defendant’s Emergency Motion to Re-open Detention Hearing is denied.

Caruso, who is also known as Kryp+0 K!ng or “crypto king”, is charged by criminal complaint with one count of Conspiracy to Commit the crimes of Wire Fraud and Money Laundering. In the complaint, he is charged with carrying out a Ponzi “cryptocurrency” scheme that defrauded over 100 victims of at least $7.5 million. The offense is alleged to have been committed in a relatively short period of time, since June 2018. During this time, it is alleged by the Government that bank records and casino records establish that Caruso lived an extravagant lifestyle, to include taking 30 trips to Las Vegas. He has flown on private jets to numerous domestic and overseas destinations.

The Government asserts that, as investigators have not been able to trace where all of the investor money in the defendant’s alleged scheme has gone, he could utilize those funds to flee the jurisdiction. The Government has also asserted that their financial investigation has uncovered no evidence of any legitimate investment of investor funds.

The defendant has seven prior felony convictions, beginning with two counts of “Extortion Threats” at the age of 18, committed in Collier County, Florida. Although he received probation for those offenses, he violated probation on three different occasions, two times for committing new crimes, and once for an unknown reason in 2016, after which he was sentenced to three years in prison. Defendant was released from prison in November, 2017, just months before he is alleged to have committed the present offense.

Caruso was also convicted of two counts of felony Theft–Obtain by Misrepresentation, in Scottsdale, Arizona, for which he ultimately received seven years’ probation. While on probation, he was convicted of felony Forgery–Offers Forged Instruments, in Scottsdale, Arizona, for which he received a year in jail and five years of probation. Thereafter, and also while on probation, he was convicted of two counts of Fraudulent Schemes/Artifices, in Maricopa County, Arizona, for which he received 90 days custody and five years of probation.

Although Caruso faces only a five-year maximum sentence for the charge against him, he is likely looking at substantial time in prison if convicted, based upon his criminal history.

The Court notes that Caruso has substantial ties to the community, as evidenced by the numerous letters submitted to the Court on his behalf from family and friends. He has proposed that a friend, Greg Price, mortgage the $140,873 equity in his $340,873 home to secure a bond for Defendant. Mr. Price has also agreed to serve as a third-party custodian. The Government proffered that Mr. Price is associated with Caruso’s father in a business that has received approximately $140,000 from Caruso’s company.

The defendant sought to reopen this detention hearing on two new grounds: 1) the spread of COVID-19 presents a threat to Caruso because he is incarcerated, and (2) his friend, Mr. Price has agreed to increase the amount of secured bond from $140,000 to $300,000.

The Court finds that the increased amount of proposed bond amount does not change the Court’s previous analysis and conclusion, particularly given Mr Price’s relationship with the defendant and his father, and particularly as the bond amount is not sufficient to assure the safety of the community or the defendant’s appearance.

To the extent Caruso’s motion is based upon the defendant’s increased risk of contracting COVID 19 while in pretrial detention at CoreCivic, the Court concludes that the defendant only speculates as to the risk.

Since Caruso was detained, he has been indicted on 17 felony counts of conspiracy, wire fraud and money laundering. The indictment alleges a scheme to defraud victims of at least $9 million. Since his arrest, Caruso and his father have contacted some of the alleged victims, the Court notes.

Th defendant also does not establish how his trial preparation is hampered in any significant way by COVID 19, or that the trial will be substantially delayed, the Judge said.

Finding that the defendant has not presented new information that changes this Court’s previous finding that he should be detained pending trial, the Court denied Caruso’s motion to reopen detention hearing.