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A Nevada court has found a Las Vegas businessman guilty of 11 counts of wire fraud, two counts of mail fraud, and two counts of money laundering for defrauding over $24 million from hundreds of investors. According to the U.S. Attorney’s Office, Brent Kovar presented Profit Connect to investors as a crypto mining operation that used an artificial intelligence supercomputer for its operations. He promised a fixed rate of return that paid 15% to 30% APR and also came with a 100% money-back guarantee. However, it turned out that the “profits” that the earlier investors made only came from the influx of newer investors, and that the company wasn’t making any money.
Kovar victimized 400 investors, telling them that the company had cryptocurrency reserves worth hundreds of millions of dollars. In reality, it had zero holdings, couldn’t afford to pay investors their interest earnings, and had no way to return their cash despite the offered guarantee. “He used investor money to operate Profit Connect, to buy gifts for employees, to buy a house for himself, and to repay investors as if those repayments came from mining cryptocurrency and verifying cryptocurrency transactions,” the Department of Justice said in its press release.
Profit Connect operated from 2017 to 2021, which is around the same time that Bitcoin made its first major rally, with the cryptocurrency hitting a peak of over $19,000 in December of that year. This, combined with the buzzwords of “AI” and “supercomputer,” made it seem to investors that they were putting money in a groundbreaking new technology that would change the way we do finance. Unfortunately, the venture turned out to be a scam and defrauded investors out of their money with nothing to show for. It’s unclear if the funds that the investors lost will ever be recovered, but Kovar is facing a possibly lengthy jail time of a maximum of 280 years for his crimes.
Another scam rooted in cryptocurrency investment from 2017 saw retail investors lose $2 billion. BitConnect offered a similar guaranteed return on investment for anyone who put up cash on its platform until 2018, but instead of using the deposited money for trading, it was just siphoned off to the organization’s private digital wallet addresses. Even before this, another Ponzi-scheme scammer made off with $6 billion from her victims in China from 2014 until 2017 and converted it into 61,000 Bitcoin. While she has already been arrested, the seized cryptocurrency is still in limbo, so it’s unclear if and when her victims will get their money back.
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