John DeMarr, a promoter of Start Options and B2G, pleaded guilty on Friday in the Eastern District of New York for his participation in a coordinated cryptocurrency and securities fraud scheme through purported digital currency platforms and foreign-based financial accounts.
As part of his guilty plea, DeMarr admitted that he conspired with others to defraud investor victims by inducing them to invest in “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.” Both Start Options and B2G, however, were fraudulent.
As part of the conspiracy, in approximately December 2017, DeMarr and others began offering securities in the form of investment contracts to U.S. and international investors through the Start Options website. Investments were accepted in Bitcoin, U.S. dollars or Euros. To participate, investors had to deposit their funds for a specified contract period, after which they were told that they could withdraw their money at a significant profit.
According to court documents, DeMarr and others falsely claimed that investor funds would be invested in digital asset mining and trading platforms that would earn them massive profits. In truth, however, the money was never invested and was instead diverted to accounts controlled by DeMarr and others and used for various personal expenditures, including the purchase of a Porsche, jewelry, and to remodel DeMarr’s home in California.
In late January 2018, rather than permitting Start Options investors to withdraw money from their accounts after the requisite time period, DeMarr and others required investors to roll over their accounts into an unregistered “initial coin offering,” or ICO, of B2G, the second of the two fraudulent companies in which DeMarr was involved.
As part of the conspiracy, DeMarr and others also paid various promoters, including an actor famous for martial arts films made in the 1980s and 1990s, 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. DeMarr and others also created false press releases and whitepapers about B2G, fabricated B2G account statements and refused to allow investors to withdraw their money.
DeMarr pleaded guilty to one count of conspiracy to commit securities fraud and is scheduled to be sentenced on January 4, 2022. He faces a maximum sentence of five years in prison.