A crypto trader who defrauded over 170 people was sentenced to 42 months in prison on May 11 for operating a series of cryptocurrency funds claiming to make big returns but in reality were losing money and instead operated as a Ponzi scheme.

The DOJ said that 25 year old  Jeremy Spence had solicited millions through false representations, “including that Spence’s crypto trading had been extremely profitable when, in fact, Spence’s trading had been consistently unprofitable.”

Spence, who operated the social media channels for a crypto investment scheme called “Coin Signals” was handed the decision by United Stated District Judge Lewis Kaplan for the U.S. District Court for the Southern District of New York. Spence was also sentenced to three years of supervised release and ordered to pay back his victims an amount of over $2.8 million.

Spence was arrested in January 2021 by the Federal Bureau of Investigation (FBI) and seperate civil charges were brought forward by the Commodity Futures Trading Commission (CFTC).

Spence pleaded guilty to commodities fraud in November 2021 for soliciting over $5 million from unwitting crypto investors by creating various cryptocurrency funds from November 2017 until April 2019 which he falsely claimed were making returns but in reality were making losses.

One example provided by the DOJ said Spence posted a message to an online chat group claiming one of the funds made a 148% return that month.

According to Law360 U.S. District Judge Lewis Kaplan who presided over the case said:

“The thing I was struck by was the stupidity of the people you gulled into investing with you, there are real-life consequences to these shenanigans and they are serious.”

Seeking to make a profit investors would transfer crypto to Spence to invest but as his trades weren’t making gains he created fake account balances to hide the losses. Spence started operating a Ponzi scheme using funds from new investors to pay earlier investors, with estimates that around $2 million worth of cryptocurrencies were distributed in this manner.

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In a statement to the court Spence told Judge Kaplan that he is “mortified” by his own behavior, apologizing to his investors and claimed was unqualified to trade the amount he was sent adding he “entered a world that [he] was completely unprepared for”.

Cointelegraph requested comment from Spence’s legal representatives but did not receive a response within the time given.