The telling warning to investors in crypto investment platform USI Tech should have been when its CEO Horst Jicha told them: "Now you might be thinking this is too good to be true."
Federal prosecutors say it was exactly that, and that the cryptocurrency investment strategy Jicha was pitching, which he promised would produce a 1% return every day, was actually a scam.
The house of cards collapsed 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 the money to investors, 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 just before Christmas when he was trying to fly to Miami on vacation, prosecutors said.
"In the early days of cryptocurrency, the defendant implemented a multi-level marketing scheme to defraud American investors excited about the cryptocurrency market," Breon Peace, US 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, assistant director in charge of the FBI's New York field office, said: “Horst Jicha allegedly advertised a platform that made cryptocurrency investing simple and more accessible to investors, with guaranteed returns. In reality, the platform was just a facade.”
Jicha was scheduled to be arraigned 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 had alleged and suggested others had played a larger role.
“It is always difficult when investors have suffered losses at the hands of certain bad actors. “We look forward to zealously defending the allegations against Mr. Jicha and exposing the facts of his involvement with USI Tech in the hope that bad actors will be brought to justice,” they said.
According to court documents, Jicha launched the USI Tech investment scheme in Dubai in 2017, presenting it as a way for novice and experienced investors to participate in 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, in 140 days, would produce a return of 140%, or 1% per day. In promotional materials, Jicha never gave a clear explanation of how USI Tech generated such returns, other than non-specific mentions of crypto mining and algorithms, prosecutors said.
At first, USI Tech operated primarily overseas, but later in 2017, Jicha launched operations in North America with a marketing campaign and promotional seminars organized by him across the country, according to court documents.
When asked by some potential investors whether USI Tech was a Ponzi scheme, Jicha and other executives assured them it was not and said they had consulted with regulators and compliance attorneys at the Securities and Exchange Commission to verify that their scheme was completely legal.
Part of the pitch included offering substantial commissions to clients who brought other investors to the platform, prosecutors said.
Within a year, USI Tech had raised tens of millions of dollars in investments and attracted the attention of regulators in Texas, North Carolina and several Canadian provinces, who told the executives that what they were doing was illegal, the court found. filings.
As a result, prosecutors say Jicha opted to shut down USI Tech's U.S. operations. He initially told investors he was working on ways to make the platform compliant with the law and back up and running. But soon after, prosecutors say, he simply disappeared with the $150 million.
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