Former corrections officer admits role in ‘crypto pension’ fraud scheme

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A former New Jersey corrections officer this week in Newark federal court admitted to orchestrating fraud schemes that resulted in hundreds of thousands of dollars in losses to its victims.

John DeSalvo, 47, of Linwood, pleaded guilty before U.S. District Judge Brian Martinotti to a two-count information charging him with two counts of securities fraud.

One involved a cryptocurrency scheme. DeSalvo created and promoted a digital token known as “Blazar Token.” He marketed the token to police, fire personnel, EMTs and other first responders as a “crypto pension” that could supplement investors’ existing pension plans. In late 2021, prosecutors say that DeSalvo used social media to fraudulently solicit investments in the token through misrepresentations. That move raised more than $620,000 from over 200 investors.

“After receiving investor funds, DeSalvo frequently used the funds for various illicit purposes unrelated to Blazar including personal expenses, day-trading in various volatile cryptocurrencies, and payments to prior investors in the manner of a Ponzi scheme,” according to case documents and court statements released by the United States Attorney’s Office for New Jersey. “In May 2022, DeSalvo sold off more than 41 billion of his own Blazar tokens, which caused the price of the token to drop precipitously. The value of Blazar never recovered, causing most investors to lose their entire investments.”

Brokerage-1

The second scheme involved an online trading platform and investment group, Brokerage-1. DeSalvo managed the platform between January 2021 and May 2021.

Prosecutors allege that, again, DeSalvo marketed the investment group on social media through misrepresentations and false claims about his success as an investor. He solicited nearly $100,000 in investments from about 20 individuals. DeSalvo then briefly engaged in trading activities before transferring all the funds out of the investment group’s account and into his personal accounts at Brokerage-1 and Coinbase.

“DeSalvo then used the funds for various non-investment purposes such as credit card payments, personal trading in volatile in cryptocurrencies, and payments to a contractor who performed work on DeSalvo’s personal residence,” according to prosecutors. “After draining the investment group’s account, DeSalvo advised the investment group investors that their funds had been lost due to poor market conditions and provided the investors with false trading records purporting to show the trading activity that DeSalvo engaged in on behalf of the investment group.”

Sentencing set

The charges DeSalvo pleaded guilty to carry a maximum potential penalty of 20 years in prison as well as a $5 million fine. Sentencing is slated for Aug. 6.

“This defendant preyed on unwitting public servants to trick them into investing their hard-earned savings in a sham token he dubbed ‘the crypto pension,’ which he then stole for his personal use,” said U.S. Attorney for New Jersey Philip Sellinger. “My office will relentlessly pursue these kinds of scammers so that we can work with our partners to bring fraudsters to justice.”

“Many of his victims ended up losing their entire investments,” said FBI-Newark Special Agent in Charge James Dennehy. “He’s now facing the justice he deserves.”

An attorney for DeSalvo did not respond to a request for comment by publication of this story.

See also:

• North Jersey counseling center owner admits health care fraud
• CEO of shuttered NRIA admits role in $658M Ponzi scheme
• Former McElroy, Deutsch CFO charged with fraud, tax evasion