The CEO of CabbageTech, Patrick McDonnell, has been charged with defrauding cryptocurrency investors in New York to the tune of $200,000.

Investing in something often seems straightforward, but when you go through an intermediary, the chances for being taken advantage of can increase dramatically. Case in point is Patrick McDonnell, the CEO of CabbageTech, who is now facing a nine-count indictment in New York for defrauding cryptocurrency investors. Over the course of his operation, he allegedly conned his victims out of over $200,000.

Cryptocurrency Con in New York

Patrick McDonnell, who is also known as Jason Flack, presented himself to cryptocurrency investors as a person knowledgeable about trading in virtual currencies. He offered crypto trading advice to his victims and offered to buy and sale cryptocurrencies for them.

He first began his scam back in November 2014, and it lasted until January 2018. He began offering his “services” through CabbageTech (also known as Coin Drop Markets) in May 2016. Law enforcement says that he, nor his company, actually offered any trading service. Instead, he used smoke and mirrors, via fake balances, to keep the money for his own personal use. When clients began to ask questions, he would put them off and then eventually stopped responding to them altogether.

Arrested and Charged

After an investigation, McDonnell was arrested and charged with wire fraud. Overall, he conned his clients out of $194,000 in cash, 4.41 Bitcoin ($18,032 at the time of writing), 206 Litecoin ($12,611), 620 Ethereum Classic ($3,019), and 1,342,634 Verge ($9,586).

United States Attorney Richard P. Donoghue stated:

As alleged, the defendant defrauded investors by making false promises and sending them fraudulent balance statements, hiding the fact that he was stealing their money for his personal use. The defendant’s fraud ends now, he will be held responsible for his criminal conduct.

USPIS Special Agent-in-Charge Bartlett added:

The defendant, Patrick K. McDonnell, used smoke and mirrors to allegedly dupe investors into paying his company—CabbageTech, for advice and strategies on crypto-currency trading. However, Postal Inspectors and their federal law enforcement partners unmasked McDonnell and his scheme to defraud investors, and brought him to justice for his alleged criminal actions.

Donoghue noted the invaluable assistance provided by the Commodity Futures Trading Commission for the investigation. The CFTC had already gone after McDonnell and CabbageTech for stealing client funds back in January 2018.

Sadly, such cases like this are heard far too often. Before investing your hard-earned dollars, always do your due diligence. Scammers rely upon ignorance to ply their trade. Unless you’re a massive institutional investor, there’s really no need to rely upon an intermediary to buy or sell cryptocurrency when you can just set up an account on a well-known and trusted exchange.

Have you ever been the victim of fraud in the cryptocurrency space? Let us know in the comments below.

Images courtesy of Adobe Stock, Wikimedia Commons/Beyond My Ken, and Wikimedia Commons/Cliff.