As we count down the top ten IRS:CI scams of 2023, crypto fans will be interested in #8, a defendant who manipulated blockchain tech to earn millions—and a prison term.
Amir Bruno Elmaani created the digital currency “Oyster Pearl.” The venture was fraught from the beginning as Mr. Elmaani did not register the currency with the U.S. Securities and Exchange Commission (SEC). As a sidebar—the SEC takes the position that many cryptocurrencies controlled by an issuer are subject to SEC regulations.
In 2017, Mr. Elmaani, also known as “Bruno Block,” created a business model whereby users could buy online storage with Pearl tokens. He sold tokens through a coin offering and on other crypto platforms. At the outset, Mr. Elmaani stated he would take a “founders share” of the tokens. The company, Oyster Pearl, Inc., was set up as a shell company which did not reveal the connection to Mr. Elmaani or “Bruno.”
In 2018, Mr. Elmaani moved millions of Pearl tokens off Oyster Pearl into a different crypto wallet to avoid being “double-taxed.”
A basic tenet of the blockchain is that the number of tokens of any currency are fixed, giving buyers security that the value of their token may rise or fall, but will not be diluted. In late 2018, Mr. Elmaani began to mint new tokens, converting his new tokens into different cryptocurrencies, dealing in precious metals like gold bars, and using large amounts of cash for lifestyle expenses. He paid no taxes on the incoming largess and incurred a tax liability of more than $5.5 million.
As the scam disintegrated and Mr. Elmaani began selling his extra tokens he showed little concern for purchasers of Pearl tokens. As the tokens dropped approximately 65 percent in value, he noted, “only the ones who cash out first make it out.”
A U.S. Attorney involved in the matter noted, “Amir Elmaani violated the duty he owed to pay taxes on millions of dollars of cryptocurrency profits, and he also violated the trust of investors in the cryptocurrency he founded. Participants in the cryptocurrency markets must play by the rules, and this Office will be tireless in prosecuting those who do not."
Following an IRS criminal tax investigation, Mr. Elmaani pled guilty to tax crimes. He will serve a four-year prison term and likely spend a long time paying restitution of $5,523.794.00 to the government.
The crypto industry saw a big splash in fraud with FTX, whose founder Sam Bankman-Fried was just sentenced to 25 years in prison. In recent years, as regulatory efforts by the IRS and SEC have tightened, crypto is not the opaque wild west it once was. The Pearl Exchange is a cautionary tale—you cannot mint your own money. Report the asset, pay the taxes—and avoid prison.
If you have crypto concerns about taxes, speak with an experienced tax attorney.
Speak with our legal group today about an IRS audit, criminal tax charge, or pending tax litigation
With offices in Chicago and Cleveland, the legal team at Robert J. Fedor, Esq., LLC delivers strategic representation and guidance on compliance questions, tax litigation, or payroll tax issues. Call 800-579-0997 or contact us online today.
