David Kagel, an 86-year-old former attorney from California, has been sentenced to five years of probation and ordered to pay nearly $14 million in restitution after pleading guilty to his involvement in a multi-million-dollar cryptocurrency Ponzi scheme. The sentencing took place on October 8, handed down by Judge Gloria Navarro in a federal court in Las Vegas.
Kagel, currently receiving hospice care at a senior facility in Las Vegas due to deteriorating health, will serve his probation within the facility. If he leaves, he will be required to wear a monitoring device as part of his sentence.
Kagel’s Role in Deceptive Crypto Bot Trading Scheme
Kagel was charged alongside two accomplices for participating in a fraudulent crypto bot trading program between December 2017 and June 2022. Prosecutors revealed that Kagel and his associates lured investors by promising high returns with no risk, raising approximately $15 million under the pretense of legitimate cryptocurrency trading ventures.
Using his position as a former attorney, Kagel drafted letters on his law firm’s official letterhead to add credibility to the scheme. These letters falsely assured investors of guaranteed profits, with returns ranging from 20% to 100% within 30 days. Additionally, Kagel claimed that their principal investments were secured, stating he held 1,000 Bitcoin—valued at $11 million in early 2018—in escrow to protect their funds.
Kagel further misrepresented his experience in cryptocurrency to gain the trust of his victims, amplifying the deceit behind the Ponzi scheme.
Legal Consequences and Co-Defendants
In 2023, the California Supreme Court revoked Kagel’s law license due to his failure to respond to charges related to the misappropriation of $25,000 in client funds. This was not Kagel’s first legal violation—his law license had been suspended twice before, in 1997 and 2012.
While Kagel has admitted guilt, his co-defendants, David Saffron and Vincent Mazzotta, have pleaded not guilty and are set to stand trial in a Los Angeles federal court in April 2024.
Crypto Phishing Scams Surge in September
While Ponzi schemes are one threat to crypto users, phishing scams remain a major concern. According to Web3 anti-scam platform Scam Sniffer, over 10,000 victims lost approximately $46 million to phishing attacks in September 2024 alone. Cybercriminals are increasingly using sophisticated techniques like automated email replies and malware such as the Cthulhu Stealer to compromise users’ systems, steal personal information, and infiltrate crypto wallets.
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