Ryan Felton has pleaded guilty to multiple counts of wire fraud, securities fraud, and money laundering charges on the fourth day of his jury trial arising from his fraudulent promotion of two cryptocurrency investment schemes that cost investors millions in losses.
“The defendant used 21st century technology to perpetrate an age-old fraud: lying to investors to steal their money and fund his own lavish lifestyle,” said U.S. Attorney Ryan K. Buchanan. “Felton’s conviction should serve as a warning to anyone who seeks to capitalize on emerging technology to victimize others.”
“The technology has advanced, but the crime remains the same, and those who invest in cryptocurrency must be wary of opportunities that appear too good to be true,” said Keri Farley, Special Agent in Charge of FBI Atlanta. “The FBI is committed to protecting investors from sophisticated cryptocurrency scammers that seek to capitalize on the novelty of digital currency.”
According to U.S. Attorney Buchanan, the indictment, and other information presented in court: In 2017, Felton promoted an initial coin offering (ICO) for a new entertainment streaming platform, FLiK, which he promised would surpass Netflix. ICOs are fundraising events during which the issuers of a unique cryptocurrency “token” or “coin” set an amount they want to raise, offer it to the public in a crowd sale, and receive cryptocurrency from investors in exchange.
In order to increase, or pump, the price of FLiK coins, Felton falsely represented to investors that a prominent Atlanta rapper and actor was a co-owner of FLiK, the United States military had agreed to distribute the streaming platform to service members, and FLiK was finalizing licensing deals with major film and television studios. In reality, the rapper had no role in the company beyond authorizing a promotional social media post, FLiK had no military contract, and Felton never had discussions with any studio about licensing content. Felton further claimed that he was actively developing the platform and would use all funds raised in the ICO to launch FLiK. After the ICO closed, Felton dumped more than 40 million FLiK coins on trading markets, causing the value of FLiK coins to plummet.
Instead of using investor funds to develop the platform, Felton diverted approximately $2.4 million in investor proceeds from the ICO and trading markets to his personal account. He used the vast majority of the investor proceeds to fund his extravagant lifestyle, including all-cash purchases of a $1.5 million residence, a $180,000 red 2007 Ferrari 599 GTB Fioran Coupe, a new $58,250 Chevy Tahoe, and approximately $30,000 in diamond jewelry.
In 2018, Felton promoted a second ICO for a new company, CoinSpark, which was a cryptocurrency trading exchange. In order to attract investors to the ICO, Felton promised that Spark coin investors would receive 25% of the trading exchange’s profits in the form of dividends. Felton further claimed that a global accounting firm would audit CoinSpark’s finances on a quarterly basis, but, in reality, he never spoke with the accounting firm. Felton also posed as a potential investor, using fake names, on various internet forums and social media sites to further promote false information and build up excitement in CoinSpark.
After raising more than $200,000 in the ICO, Felton announced that CoinSpark would not pay Spark investors a dividend and offered ICO investors a refund. Felton then repeatedly rejected or ignored investor requests for refunds. The CoinSpark exchange ultimately launched months after its promised delivery date but had significant technical issues and minimal trading activity. Instead of applying ICO proceeds to CoinSpark, Felton again diverted significant funds to his personal bank account.
Ryan Felton, 48, of Atlanta, Georgia, pleaded guilty to twelve counts of wire fraud, ten counts of money laundering, and two counts of securities fraud on the fourth day of his jury trial. Sentencing will be scheduled at a later date before U.S. District Court Judge J.P. Boulee.
This case is being investigated by the Federal Bureau of Investigation.
The SEC Washington, D.C. Office and the SEC New York Regional Office provided valuable contributions in this case.