John DeMarr pleads guilty to crypto scam involving actor Steven Seagal

Rick Steves

In February 2020, Steven Seagal was charged with unlawfully touting a digital asset offering, failing to disclose payments he received for promoting the ICO.

John DeMarr has pleaded guilty in the Eastern District of New York for conspiring with others to defraud investor victims by inducing them to invest in their fraudulent companies, “Start Options” and “B2G,” based on materially false and misleading representations.

Start Options purported to be an online investment platform that provided cryptocurrency mining, trading, and digital asset trading services.

B2G was purportedly an “ecosystem” that would allow users to trade B2G tokens, provide digital wallet staking, and trade digital and fiat currencies “on a secure, comprehensive platform.”

The scammers, including John Demarr, began offering securities in the form of investment contracts to U.S. and international investors, who had to deposit their funds in Bitcoin, USD, or EUR, for a specified contract period, after which they were told that they could withdraw their money at a significant profit.

Investor funds were supposed to be invested in digital asset mining and trading platforms that would earn them massive profits, but the fraudsters instead diverted to accounts controlled by them and used for various personal expenditures, including remodeling DeMarr’s home in California.

The group of scammers also featured fake celebrity endorsements to promote its securities offerings on Start Options, including a professional athlete whose name and likeness was used without his knowledge or consent.

The scam raised millions of dollars worth of Bitcoin, Ethereum, and fiat currency to financial accounts controlled by DeMarr and others in the U.S. and abroad.

Then, rather than allowing Start Options investors to withdraw their money, the conspirators forced investors to roll over their accounts into an unregistered “initial coin offering” of B2G to build an “ecosystem” that would allow users to trade B2G tokens, provide digital wallet staking, and trading. However, investors never actually received any digital tokens and funds from the offering were not used to develop the B2G platform.

DeMarr pleaded guilty to one count of conspiracy to commit securities fraud and is scheduled to be sentenced on Jan. 4, 2022. DeMarr faces a maximum sentence of five years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Steven Seagal’s part in the scam

Scammers paid many celebrities, including martial arts actor Steven Seagal, to serve as a promoter and celebrity spokesperson, falsely claiming that B2G could generate an “8000%” return for investors within one year and that he was a participant in the ICO.

In February 2020, Steven Seagal was charged with unlawfully touting a digital asset offering, failing to disclose payments he received for promoting the ICO.

The SEC’s order found that Seagal failed to disclose he was promised $250,000 in cash and $750,000 worth of B2G tokens in exchange for his promotions, which included posts on his public social media accounts encouraging the public not to “miss out” on Bitcoiin2Gen’s ICO and a press release titled “Zen Master Steven Seagal Has Become the Brand Ambassador of Bitcoiin2Gen.”

A Bitcoiin2Gen press release also included a quotation from Seagal stating that he endorsed the ICO “wholeheartedly.” These promotions came six months after the SEC’s 2017 DAO Report warning that coins sold in ICOs may be securities.

The SEC has also advised that, in accordance with the anti-touting provisions of the federal securities laws, any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion.

The company paid Seagal approximately $157,000 for these promotions, pursuant to the Endorsement Agreement. Seagal did not, however, disclose in his posts any information about the fact or amount of compensation he received, or was to receive, from B2G for making the promotions.

As part of the settlement with the SEC, Seagal had to pay disgorgement of $157,000, prejudgment interest of $16,448.76, and a civil money penalty in the amount of $157,000 to the Securities and Exchange Commission.

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