The U.S. Securities and Exchange Commission (SEC) has charged John A. DeSalvo, a former New Jersey State Correctional Police Officer, with fraudulently raising funds through the unregistered offering of the Blazar Token, a crypto asset security he created. The token saw its downfall in May 2022.
DeSalvo initiated the Blazar Token in November 2021. By the time of its collapse in May 2022, he had amassed at least $620,000 from around 220 investors. DeSalvo had positioned the Blazar Token as a replacement for “existing state pension systems” catering to law enforcement, firefighters, and paramedics. He also falsely conveyed to investors that the token had SEC registration and was available for purchase via automatic payroll deductions, promising them “extraordinary returns.”
The SEC’s investigation revealed that DeSalvo misused a significant portion of the investor funds. He transferred a large chunk to his personal crypto asset wallets, with some of these funds being diverted for a bathroom renovation.
Interestingly, DeSalvo’s primary targets for his deceptive schemes were law enforcement officials and first responders.
In another twist, starting from late January 2021, DeSalvo had been enticing investors, predominantly through social media platforms, for an investment venture that involved stocks, options, and crypto asset securities. From this venture, he gathered $95,000 from 17 investors. In a brief period, he lost approximately $17,000 in speculative ventures and diverted the leftover $78,000. He later notified the investors that their investments had lost all value because of adverse market trends.
Gurbir S. Grewal, the Director of the SEC’s Division of Enforcement, shed light on the case by stating that DeSalvo had masterminded multiple deceptive investment schemes. These schemes primarily targeted law enforcement personnel with promises of sky-high returns. Grewal emphasized the gravity of DeSalvo’s misconduct, noting how he leveraged his previous role as a corrections officer to win the confidence of his law enforcement colleagues.
DeSalvo is being sued for allegedly breaking anti-fraud and securities registration regulations in the U.S. District Court for the District of New Jersey. In light of this, the SEC seeks injunctive measures, repayment with prior interest, and civil fines. Concurrently, the U.S. Attorney’s Office for the District of New Jersey has announced criminal proceedings against DeSalvo.
This incident underscores the imperative for investor prudence and the inherent risks tied to unregistered crypto asset securities.
Image source: Shutterstock