The United States Department of Justice (DOJ) has confiscated $6.5 million of cryptocurrencies from the operator of Banana Fund.
The unnamed administrator allegedly plotted and conducted a scheme to defraud investors using “interstate wires.” The project was investigated by the US Secret Service that filed a forfeiture suit against the operator.
The project’s website presented it as a crowdfunding platform that would provide the first 10,000 users to buy a stake in the platform. According to its white paper, a token marketplace was scheduled to start in January 2017; however, the token marketplace never started.
The fund was supposed to be used to invest in projects to generate revenue for the investors. However, the operator did not move the funds for a year, after which he announced that investors will be receiving limited refunds.
The assets users received were way below the total sum the operator was holding. Investors had simply gained wealth by holding onto their Bitcoin the value of which rose in the period of the Ponzi scheme.
in early 2018, Banana Fund’s website started redirecting people to a document reading that the fund had failed and the owner was left with $1.73 million only. The project began offering refund to the users that although were greater than their original investment, would still cause them substantial loss due to the increase in Bitcoin’s value.
However, the funds were never returned to the investors.
The operator, on the other hand, used the investors’ funds to trade and generated income for personal gain. He bought and sold multiple coins and managed to accumulate $11 million. At one point, he even attempted to withdraw 100 BTC to buy a house.
As a result, the US Secret Service seized his assets and “commenced this action to begin returning these funds to the administrator’s victims.” Furthermore, the operator is subject to forfeiture, meaning that the government will keep the assets belonging to the Banana fund as he knowingly defrauded investors.