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.

Read this next

Digital Assets

Digital Dollar but without blockchain?

A digital dollar is on the horizon and is being actively considered by the Fed and the SEC in a push towards digitalization of the financial ecosystem and also to stop the advance of crypto tokens and stablecoins but in a new twist last week, reports have emerged that it may not be based on the blockchain after all.

Institutional FX

Deutsche Bank goes live with its FX pricing and trade engine in Singapore

Deutsche Bank has gone live with its electronic foreign exchange pricing and trading engine in Singapore, where demand for currency trading among institutional players is on the rise.

Retail FX

CySEC extends the suspension of Depaho license until November 19

The Cyprus Securities and Exchange Commission (CySEC) has decided to extend further the suspension of the license of the Cyprus investment company Depaho Ltd, which operates the retail FX brands GTCM, FXGM and TRADEAPP.

Retail FX introduces QuantX, a tool to build automated portfolio

Multi-licensed broker has rolled out a new portfolio platform, QuantX, which uses a client’s risk tolerance assessment and other criteria to create fully customized investment portfolios.

Digital Assets

Ripple scores major win: Judge orders SEC to explain…a lot

The SEC is ordered to explain, among other things, how the Howie test applies to XRP, what is the status of Ether and Bitcoin, and the sale of XRP as investment contracts.

Retail FX

Trade CFDs on 900+ of the Biggest Companies this Earnings Season with HotForex

Traders with the internationally acclaimed multi-asset broker HotForex can trade CFDs on the stocks of over 900 companies during Earnings Season with tight spreads, flexible leverage, negative balance protection and the many other advantages that have made it an honest, open and transparent broker of choice to over 2.5 million traders around the world.  

Digital Assets

Polygon (MATIC) double spend bug yields $2 million bounty for developer

Polygon, the Layer 2 solution on top of Ethereum, has recently paid out the highest ever bug bounty in history to a whitehat developer Gerhard Wagner for pointing out a double-spend bug in the network which could have resulted in huge losses if it had been exploited.

Digital Assets

KuCoin aims to become largest social trading platform in crypto

KuCoin was founded in September 2017 and it currently provides Spot trading, Margin trading, P2P fiat trading, Futures trading, Staking, and Lending to its 8 million users in 207 countries.

Digital Assets

Apifiny’s crypto trading network adds Instant Transfers for best bid and offer

Instant transfers significantly enhance Apifiny Connect, allowing traders to more efficiently buy and sell on 25 connected markets across six continents.