CabbageTech Operator Indicted for Fraud
Richard P Donoghue, the Eastern District of New York’s US Attorney unsealed a 9-count indictment against the owner and operator of the investment company CabbageTech, Patrick McDonnell. The news was announced via a press release by the Department of Justice on March 26.
Running a Fraudulent Scheme
Patrick McDonnell, also known as Jason Flack, reportedly operated a BTC (Bitcoin) trading company, and was arrested by the Federal Bureau of Investigation (FBI) for fraud to the tune of over $1 million.
CabbageTech, based out of Staten Island, was found to be doing business as Coin Drop Markets (CDM), and it as well as its owner McDonnell were operating a fraudulent scheme involving the purchase and sale of BTC and LTC (Litecoin).
US Attorney Richard P Donoghue stated that the accused had been indicted on 9 counts of wire and securities fraud and is facing up to 20 years in prison. In the press release, Donoghue stated that McDonnell made false promises to investors and sent them fake balance statements. He hid the fact that he was actually stealing their money from them.
Donoghue further stated that the accused had used lies and deception from November 2014 to January 2018 to cheat investors by representing himself as an experienced crypto trader. He promised them trading advice and bought and sold cryptocurrencies on behalf of his so-called clients. McDonnell claimed that he could get up to 300% returns in less than one week.
It was also found that McDonnell used new investors’ money to pay back older one, like a Ponzi-scheme, so that these investors would re-invest their money with him and also refer other people to him.
According to the Justice Department, after sending clients fake balance records, when his customers asked to withdraw their funds, McDonnell lied about why he could not pay them at that time.
Then, he removed his website, social media material and stopped all communication with his investors.
According to the records, McDonnell cheated investors of US$194,000, 4.41 BTC (~$17,551), 206 LTC (~$12,215), 620 ETC (~$2,914) as well as 1,342,634 XVG (Verge, ~$9.035).
Support from the CFTC
In the press release, Donoghue also stated that the Department of Justice had been supported by the CFTC (Commodity Futures Trading Commission) during the investigation.
Last year in August, the CFTC had managed to win a court order to finally permanently ban CabbageTech and McDonnell. During the trial, it was ruled that McDonnell was cheating investors. The judge had ordered him to pay back investors along with penalties.
McDonnell initially represented himself for a brief time, stating that he could not afford legal counsel, however, he then stopped attending the court proceedings completely.