A former New Jersey corrections officer was arrested today for orchestrating two different fraud schemes, including a cryptocurrency scheme that resulted in losses of more than $600,000.
John DeSalvo, 47, of Marmora, New Jersey, is charged by criminal complaint with two counts of wire fraud, two counts of securities fraud, and two counts of money laundering related to the two fraud schemes.
He was scheduled to appear this afternoon before U.S. Magistrate Judge André M. Espinosa in Newark federal court.
“This defendant, a former New Jersey corrections officer, is alleged to have committed two brazen investment fraud schemes in which he falsely promised huge returns to obtain hundreds of thousands of dollars from unsuspecting investors,” said U.S. Attorney Philip R. Sellinger. “In one scheme, DeSalvo is alleged to have targeted law enforcement and first responders to invest in a digital token that he falsely claimed was SEC-approved and listed on cryptocurrency exchanges.”
“In the other, he is alleged to have obtained investments by promising extraordinary rates of return that we allege were too good to be true,” said Sellinger. “Once DeSalvo got his investors’ money, he is alleged to have spent it on himself, paying personal expenses and funding his own investments.”
“We allege DeSalvo created and marketed a cryptocurrency to first responders as a ‘crypto pension’ that could supplement their existing pensions,” FBI – Newark Special Agent in Charge James E. Dennehy said.
“Our investigation shows instead of actually making the rate of return he boasted about, he allegedly used hard-earned money from firefighters, police officers, EMTs and other public servants as his personal bank account,” Dennehy said. “We are asking anyone who may believe they are a victim of DeSalvo to please reach out to the FBI at 1-800-CALL-FBI.”
Prosecutors say DeSalvo was the creator and promoter of a digital token known as “Blazar Token,” (Blazar) 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 offer “more stability than any other token” and that the value of 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 in the process of becoming, or was already, a securitized token approved by the Securities and Exchange Commission; and Blazar could be purchased through payroll deductions and ACH transactions.
DeSalvo additionally 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.
In May 2022, DeSalvo sold off more than 41 billion of his own Blazar tokens, which caused the price of the token to drop precipitously. The value of Blazar never recovered, causing most investors to lose their entire investments.
In his second scam, DeSalvo managed and solicited investment in a group through Brokerage-1, an online trading platform, between January 2021 and May 2021.
DeSalvo marketed the investment group largely through social media posts in which he falsely touted his success as an investor.
DeSalvo claimed to potential investors, “I have been averaging close to 1200 % over the last 2 years. I am in the top 1,000th percent in the world. That’s the truth, the return rates I have been averaging are so high that I have people throwing money at me to invest.”
In total, DeSalvo solicited approximately $100,000 in investments from approximately 20 individuals for the investment group.
After receiving the funds, DeSalvo engaged in trading activities for a brief period of time before transferring all the funds out of the investment group’s account at Brokerage-1 and into personal accounts held by DeSalvo at Brokerage-1 and Coinbase.
DeSalvo then used the funds for various non-investment purposes such as credit card payments, personal trading in volatile cryptocurrencies, and payments to a contractor who performed work on DeSalvo’s personal residence.
After draining the investment group’s account, DeSalvo advised the investment group investors that their funds had been lost due to poor market conditions and provided the investors with false trading records purporting to show the trading activity that DeSalvo engaged in on behalf of the investment group.
The counts of wire fraud carry a maximum potential penalty of 20 years in prison and a fine of $250,000. The counts of securities fraud carry a maximum potential penalty of 20 years in prison and a fine of $5 million. The counts of money laundering carry a maximum potential penalty of 20 years in prison and a fine of $500,000.