“Coyote of Wall Street” of CabbageTech Pleads Guilty to Scamming Crypto Clients in New York
- The lawsuit against Patrick McDonnell has found that he is guilty of scamming consumers who believed they were investors.
- The CFTC ultimately ended up calling cryptocurrency a commodity during the proceedings.
Scammers are rather common in the finance industry, and the crypto market is no different. Patrick McDonnell has become practically infamous in recent news, calling himself the “coyote of Wall Street” for his work. Due to recent charges against him, McDonnell has decided to plead guilty, admitting to lying to investors about putting their money into cryptocurrency, choosing to keep the funds for himself instead. The 46-year old told US District Judge Nicholas Garaufis that he had kept the money to spend on “personal expenses,” according to reports by Bloomberg.
McDonnell is also known as Jason Flack, and he was responsible for a company called CabbageTech Corp., which also had another name – Coin Drop Markets. Over the course of three years, the defendant said that he had helped 8,000 investors trade approximately $50 million. According to the court documents, investor money was kept by McDonnell, as he spent at least $194,000. The primary man involved with this case was the victim of $164,000 of that theft, after being told by McDonnell that the stake had risen to $274,000.
On September 10th, 2019, McDonnell will be faced with sentencing for his crimes, which could come with up to 2.5 years in prison, due to a plea agreement. Even with the high-tech commodity on the line, McDonnell’s methods are hardly unique or innovative. In a statement reported by Law360, US Attorney Richard Donoghue for the Eastern District of New York said,
“McDonnell has admitted that he used old-fashioned deception to defraud investors seeking to trade 21st-century currencies.”
Much like McDonnell’s methods were not new, his attendance in a courtroom was not either. In August last year, both McDonnell and his firm were assigned a major fine and a ban on digital assets trading. The case was filed by the Commodity Futures Trading Commission, which stated that he had lied about the hack he claimed occurred on their platform’s website in June 2017, used as justification for suspending services. At the time, he received a fine of over $1.1 million, divided between penalties and restitution.
During the CFTC case against CabbageTech in January last year, the commission said that the defendants were taking advantage of the hype around cryptocurrency. James McDonald, the director of enforcement for the CFTC, said,
“As alleged, the Defendants here preyed on customers interested in Bitcoin and Litecoin, promising them the opportunity to get the inside scoop on the next new thing and to benefit from the trading acumen of a supposed expert.”
Another case that was filed around the same time by the CFTC claimed that Dillon Michael Dean was responsible for operating a Ponzi scheme. During the scheme, 600 investors lost out on $1.1 million in Bitcoin. However, the most unique circumstance to come out of these events is that the CFTC ended up calling cryptocurrency a commodity.
Perhaps that is the silver lining for the community around this case.