A former New Jersey state correctional officer was charged Wednesday by the Securities and Exchange Commission (SEC) for fraudulently raising funds through a now-collapsed unregistered crypto asset security he created and misappropriating investor funds.
John DeSalvo, 47, marketed his digital token known as the "Blazar Token" to police officers, firefighters, EMTs and other first responders as a "crypto pension" that could be used to supplement existing pension plans, according to the SEC's civil complaint.
The complaint accused DeSalvo of falsely telling investors Blazar was registered with the SEC, it could replace existing state pension systems, and he was arranging for it to be purchased by automatic payroll deduction.
He allegedly promised Blazar would offer "more stability than another other token" and its value would rise over time as any investment fund would, but at a "much higher rate of success," according to criminal charges also announced Wednesday by the District of New Jersey U.S. Attorney's Office.
The SEC filed civil charges against former New Jersey state correctional officer John DeSalvo, 47, for fraudulently raising funds through a now-collapsed unregistered crypto asset security he created and misappropriating investor funds. (Reuters/Jonathan Ernst / Reuters Photos)
After raising at least $620,000 from approximately 220 investors since Blazar's launch in November 2021, DeSalvo's token collapsed in May 2022 after he sold off more than 41 billion of his own Blazar tokens, according to the SEC complaint. The move caused the token's value to drop very quickly, and it never recovered – resulting in most investors losing their entire investments.
DeSalvo is accused of using investors' funds for reasons unrelated to Blazar, including renovating a bathroom and sending money to his personal crypto asset wallets, the SEC complaint revealed.
DeSalvo is accused of in a second fraud scheme where he allegedly solicited 17 investors to participate in a "venture where he was to invest their funds in stocks, options and crypto asset securities," according to the SEC complaint. (REUTERS/Dado Ruvic/Illustration / Reuters)
He is also accused of operating a fraud scheme in January 2021 where he solicited investors to participate in a "venture where he was to invest their funds in stocks, options, and crypto asset securities," the SEC complaint included.
In that scheme, he allegedly raised $95,000 from 17 investors, which he deposited into his brokerage account. Within weeks of the deposit, he lost about $17,000 of the funds to speculative investments and then misappropriated the remaining $78,000, the complaint said.
DeSalvo allegedly told those investors that the group's securities had "lost all value due to poor market conditions."
U.S. Attorney Philip Sellinger announced DeSalvo's criminal charges include two counts of wire fraud, two counts of securities fraud and two counts of money laundering related to the schemes.