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Texas Ponzi Scheme Debtor Denied $12.5M Bankruptcy Protection in Crypto Case

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The U.S. Trustee Program (USTP) has secured a judgment denying chapter safety to a Texas man who tried to evade greater than $12.5 million in money owed linked to a cryptocurrency Ponzi scheme.

On August 1, the Bankruptcy Court for the Southern District of Texas entered a default judgment in opposition to Nathan Fuller, proprietor of Privvy Investments LLC. Fuller had filed for Chapter 7 chapter in October 2024, shortly after a state courtroom appointed a receiver to grab his property following investor lawsuits.

But federal investigators discovered that Fuller hid property, falsified paperwork, and lied underneath oath in an effort to keep away from repaying collectors.

Bankruptcy Court Bars Crypto Scheme Operator From Discharging $12.5M

According to the USTP, Fuller used Privvy Investments to solicit funds underneath the guise of crypto investments, solely to divert investor cash for private use.

Records present that he spent closely on luxurious gadgets and playing journeys and bought a virtually $1 million dwelling for his ex-wife, who was additionally concerned in the enterprise. Despite the separation, Fuller continued to reside on the property.

U.S. Trustee Kevin Epstein, who oversees Region 7 masking the Southern District of Texas, stated the ruling underscores this system’s stance in opposition to fraud. “Fraudsters looking for to whitewash their schemes is not going to discover sanctuary in chapter,” Epstein stated in a press release.

“The USTP stays vigilant for instances filed by dishonest debtors, who threaten the integrity of the chapter system.”

Investigators alleged that Fuller not solely hid intensive property but additionally failed to keep up data and submitted false testimony in each his private chapter submitting and the one filed on behalf of Privvy.

At one level, Fuller was held in civil contempt for failing to adjust to courtroom orders. During proceedings, he admitted to working Privvy as a Ponzi scheme, fabricating documentation, and offering false statements designed to impede the work of the court-appointed Chapter 7 trustee.

After failing to reply to the USTP’s criticism, the courtroom entered a default judgment in favor of the company. As a end result, Fuller stays personally accountable for his money owed, together with greater than $12.5 million in unsecured obligations listed in his filings. Creditors are actually free to proceed assortment efforts in opposition to him.

The USTP stated its mission is to guard the integrity of the chapter system for debtors, collectors, and the general public. The company emphasised that the end result in Fuller’s case demonstrates its dedication to holding dishonest actors accountable.

The judgment provides one other chapter to the mounting scrutiny round crypto-linked funding schemes. While professional blockchain corporations proceed to boost capital and construct infrastructure, fraudulent ventures corresponding to Fuller’s spotlight the dangers dealing with buyers.

Earlier this yr, web3 pockets infrastructure agency Privy, a separate firm unrelated to Fuller’s operation, closed a $15 million funding spherical led by Ribbit Capital, bringing its complete raised to greater than $40 million.

The firm’s wallet-enabled stack powers tasks like Hyperliquid, Farcaster, OpenSea, and Blackbird, serving over 50 million accounts throughout funds, DeFi, and gaming.

The juxtaposition of those developments displays a maturing crypto sector nonetheless grappling with belief points stemming from fraud.

Fraud Shadows Over Crypto Sector as Similar Cases Highlight Investor Risks

In an analogous case, on July 8, San Jose-based fintech agency Linqto filed for Chapter 11 bankruptcy in the Southern District of Texas, exposing deep cracks in its enterprise mannequin.

Once marketed as a gateway for on a regular basis buyers to purchase pre-IPO shares in tech giants like Ripple and CoreWeave, the platform now faces allegations that clients could by no means have truly owned the shares they believed they bought.

The firm listed property and liabilities between $500 million and $1 billion, with greater than 10,000 collectors doubtlessly affected.

Chief Restructuring Officer Jeffrey Stein stated “years of mismanagement” and securities legislation violations relationship again to 2020 left Linqto presumably bancrupt, additional shaking confidence in retail entry to non-public markets.

Separately, the U.S. Department of Justice announced yesterday a civil forfeiture action to seize over $5 million in Bitcoin stolen by way of SIM swap assaults.

Prosecutors stated attackers hijacked victims’ cellphone numbers between October 2022 and March 2023, intercepting authentication codes to empty crypto wallets.

The stolen funds had been allegedly funneled by way of a number of wallets and ultimately into an account at Stake.com, an internet on line casino.

Investigators accuse the perpetrators of utilizing round transactions to disguise the supply of the Bitcoin earlier than consolidation.

The put up Texas Ponzi Scheme Debtor Denied $12.5M Bankruptcy Protection in Crypto Case appeared first on Cryptonews.

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