August 23, 2023
A former New Jersey corrections officer was arrested today for orchestrating two different fraud schemes, including a cryptocurrency scheme that resulted in losses of more than $600,000, U.S. Attorney Philip R. Sellinger announced.
John DeSalvo, 47, of Marmora, New Jersey, is charged by criminal complaint with two counts of wire fraud, two counts of securities fraud, and two counts of money laundering related to the two fraud schemes. He is scheduled to appear this afternoon before U.S. Magistrate Judge André M. Espinosa in Newark federal court.
“This defendant, a former New Jersey corrections officer, is alleged to have committed two brazen investment fraud schemes in which he falsely promised huge returns to obtain hundreds of thousands of dollars from unsuspecting investors,” U.S. Attorney Sellinger said. “In one scheme, DeSalvo is alleged to have targeted law enforcement and first responders to invest in a digital token that he falsely claimed was SEC-approved and listed on cryptocurrency exchanges. In the other, he is alleged to have obtained investments by promising extraordinary rates of return that we allege were too good to be true. Once DeSalvo got his investors’ money, he is alleged to have spent it on himself, paying personal expenses and funding his own investments. This Office is committed to rooting out investment and securities fraud and protecting investors. By today’s charges, we intend to hold this defendant accountable for these alleged fraud schemes and prevent him from potentially victimizing anyone else.”
“We allege DeSalvo created and marketed a cryptocurrency to first responders as a ‘crypto pension’ that could supplement their existing pensions,” FBI – Newark Special Agent in Charge James E. Dennehy said. “Our investigation shows instead of actually making the rate of return he boasted about, he allegedly used hard-earned money from firefighters, police officers, EMTs and other public servants as his personal bank account. We are asking anyone who may believe they are a victim of DeSalvo to please reach out to the FBI at 1-800-CALL-FBI.”
According to documents filed in this case and statements made in court:
The Blazar Token Fraud
DeSalvo was the creator and promoter of a digital token known as “Blazar Token,” (Blazar) which DeSalvo marketed to police, fire personnel, EMTs, and other first responders as a “crypto pension” that could be used to supplement investors’ existing pension plans. DeSalvo promised investors that Blazar would offer “more stability than any other token” and that the value of Blazar would “continue to rise over time similar to any investment fund, only at a much higher rate of success.
”Beginning in late 2021, DeSalvo used social media platforms to fraudulently solicit investments in Blazar through a series of misrepresentations including that: Blazar was in the process of becoming, or was already, a securitized token approved by the Securities and Exchange Commission; and Blazar could be purchased through payroll deductions and ACH transactions. DeSalvo additionally falsely told investors that Blazar had been approved for inclusion on several well-known cryptocurrency exchanges and guaranteed investors rates of return of more than 20 percent with “ZERO risk.
”In total, DeSalvo raised more than $620,000 from more than 200 investors in Blazar. 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.
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.
The Brokerage-1 Fraud
Between January 2021 and May 2021, DeSalvo managed and solicited investment in an investment group through Brokerage-1, an online trading platform. DeSalvo marketed the investment group largely through social media posts in which DeSalvo falsely touted his success as an investor. DeSalvo claimed to potential investors, “I have been averaging close to 1200 % over the last 2 years. I am in the top 1,000th percent in the world. That’s the truth, the return rates I have been averaging are so high that I have people throwing money at me to invest.
”In total, DeSalvo solicited approximately $100,000 in investments from approximately 20 individuals for the investment group. After receiving the funds, DeSalvo engaged in trading activities for a brief period of time before transferring all the funds out of the investment group’s account at Brokerage-1 and into personal accounts held by DeSalvo at Brokerage-1 and Coinbase. DeSalvo then used the funds for various non-investment purposes such as credit card payments, personal trading in volatile cryptocurrencies, and payments to a contractor who performed work on DeSalvo’s personal residence.
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.
The counts of wire fraud carry a maximum potential penalty of 20 years in prison and a fine of $250,000. The counts of securities fraud carry a maximum potential penalty of 20 years in prison and a fine of $5 million. The counts of money laundering carry a maximum potential penalty of 20 years in prison and a fine of $500,000.
The U.S. Securities and Exchange Commission (SEC) also filed a civil complaint against DeSalvo today based on the same conduct.
U.S. Attorney Sellinger credited special agents of the FBI – Newark Atlantic City Resident Agency, under the direction of Special Agent in Charge Dennehy, and detectives from the New Jersey Division of Criminal Justice, Cyber Crimes Bureau, under the direction of Acting Director Derek Nececkas, with the investigation leading to the charges.
The government is represented by Assistant U.S. Attorney Anthony Torntore, Chief of the U.S. Attorney’s Cybercrime Unit in Newark.
The charges and allegations in the complaint are merely accusations, and the defendant is considered innocent unless and until proven guilty.
Defense counsel: Saverio Viggiano Esq., Assistant Federal Public Defender, Newark
Suspect Arrested in Cryptocurrency Investment Fraud Targeting First Responders
August 24, 2023 — UPDATE
TRENTON — The Attorney General’s Office today announced that a retired state Department of Corrections Lieutenant from Atlantic County has been arrested, after allegedly targeting and defrauding first responders he convinced to invest in a purported new cryptocurrency investment fund.
John A. DeSalvo, 47, of Linwood, a former resident of Marmora, N.J., was arrested on August 23, 2023, by investigators from the state Division of Criminal Justice (DCJ) and the Federal Bureau of Investigation (FBI). The charges stem from an investigation by the Cybercrimes Unit of DCJ, the New Jersey Division of Taxation, the U.S. Attorney’s Office for the District of New Jersey, the FBI, and the U.S. Securities and Exchange Commission (SEC).
During the course of the investigation, it was learned that DeSalvo, who retired from the Department of Corrections on May 1, 2010, marketed to his victims a cryptocurrency token he called Blazar, representing to prospective investors that their returns from it would supplement the New Jersey pension system. However, this token did not have any real value. The victims relied upon deceptive representations made by DeSalvo and provided him with money for investment purposes. In reality, DeSalvo profited from the capital raised by the victims, who would not have provided him with money if they were aware that the token had no value.
“This defendant allegedly used his position as a former law enforcement officer to win the trust of investors and to victimize fellow first responders,” said First Assistant Attorney General Lyndsay V. Ruotolo. “The allegations are that he intentionally targeted people who dedicate their lives to public service and risk their lives for the public good.”
“John DeSalvo allegedly embellished how much his investors stood to gain and falsely guaranteed inflated returns,” said Director of the Division of Criminal Justice J. Stephen Ferketic. “Today’s arrest demonstrates that the men and women of the Division of Criminal Justice are committed to protecting the people of New Jersey from fraudulent investment schemes like the one alleged in this case.”
DeSalvo is facing the following charges:
• Theft by Deception— 2nd Degree
• Deceptive Business Practices — 4th degree
Convictions on second-degree charges carry a sentence of five to 10 years in state prison and a fine of up to $150,000. Fourth-degree charges carry a maximum sentence of 18 months in New Jersey State Prison and a fine of up to $10,000.
The investigation was led by Detective Charles Pusloski and Detective John Luko of the Cybercrimes Unit of DCJ and Special Agent Jamie McMahon of the FBI, with valuable support from the U.S. Consumer Fraud Protection Bureau. The case is being prosecuted by Deputy Attorney General Michael J. Forte of the Cybercrimes Unit, under the supervision of Unit Deputy Chief Lisa Rastelli, Chief Jillian Carpenter, DCJ Deputy Director Derek Nececkas, and DCJ Director J. Stephen Ferketic.
Investigators urge anyone who may have been a victim of this defendant’s alleged scam to contact the Division of Criminal Justice by calling 1-800-396-2310.
The charges are merely accusations and the defendant is presumed innocent unless and until proven guilty in court.