‍New Jersey Man Pleads Guilty To Defrauding First Responders in Crypto Scam

On March 25, 2024,  John DeSalvo, a former New Jersey corrections officer, pleaded guilty to two counts of securities fraud for, among other things, orchestrating a cryptocurrency scheme that resulted in losses of more than $600,000.

“DeSalvo admits his role in two fraud schemes, one of which involved him creating and marketing a crypto token to first responders that could supplement their existing pensions,” FBI – Newark Special Agent in Charge James E. Dennehy said at the time of the plea.  “Police officers, firefighters, EMTs, and other first responders show up each day to serve and protect, hoping their hard-earned pensions will allow for a nice retirement one day. Many of his victims ended up losing their entire investments. He's now facing the justice he deserves."

According to court records, DeSalvo was the creator and promoter of a digital token known as “Blazar Token,” 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 “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 approved by the Securities and Exchange Commission. DeSalvo also 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. Investors lost their entire investments in the scheme.

In addition to the DOJ action, in August 2023, the SEC filed a civil complaint against DeSalvo based on the same conduct alleging that he fraudulently raised funds through the unregistered offering of the Blazar Token, fraud and misappropriation of investor funds.

“Our complaint alleges a brazen affinity fraud that preyed on retail investors’ trust and sense of community,” said David Hirsch, Chief of the Crypto Assets and Cyber Unit in the SEC’s Division of Enforcement at the time the complaint was filed. “Too often in crypto, we see promoters perpetrate familiar frauds in shiny new wrappers by making claims that are difficult for investors to independently verify. Registering the offer and sale of securities enables critical oversight and improves disclosures to investors, and we will continue to pursue those who fail to abide by the securities laws’ registration requirements.” 

This case is a great example of collaboration and cooperation - both between law enforcement and regulators and between federal and state investigators. The US Attorney’s Office for the District of New Jersey worked with special agents from the FBI’s Atlantic City Resident Agency and detectives from the New Jersey Division of Criminal Justice, Cyber Crimes Bureau.