86-Year-Old Former Lawyer to Pay $14 Million for Running Bitcoin Ponzi Scheme

An 86-year-old former California attorney, David Kagel, has been sentenced to five years of probation and ordered to pay nearly $14 million after admitting to conducting a multimillion-dollar Bitcoin Ponzi scheme.

In a judgment filed on October 8, Las Vegas federal court judge Gloria Navarro sentenced Kagel to one count of conspiracy to commit commodity fraud following his guilty plea in May. He is currently in hospice care at a senior facility in Las Vegas due to health issues. The man will serve his probation there unless he leaves, in which case he will be required to wear a monitoring device.

The news follows late August reports that at the time, the U.S. Securities and Exchange Commission charged two brothers for allegedly defrauding more than 80 investors for over a year in an alleged $60 million crypto Ponzi scheme. Still, crypto scams are rapidly evolving beyond simple Ponzi and pig butchering schemes, with recent reports indicating they are getting significantly more advanced.

Government prosecutors, who charged Kagel last year, stated that from December 2017 to around June 2022, Kagel and two accomplices lured victims into investing in a fraudulent cryptocurrency bot trading scheme by promising high returns with no risk. Both of Kagel’s alleged accomplices, David Saffron and Vincent Mazzotta, have pleaded not guilty and are awaiting trial in a Los Angeles federal court next April.

Over this period, the trio “fraudulently promoted and solicited investments and obtained at least approximately $15 million in victim-investor funds for various cryptocurrency trading programs,” according to prosecutors.

Kagel assisted in promoting the scheme by drafting letters, which were sent to victims, on his law firm’s letterhead. Prosecutors noted that the official letterheads helped establish trust.

Victims believed they were investing in a legitimate scheme that used trading bots to invest in cryptocurrency markets. The scheme “guaranteed” the repayment of the principal investment and promised profits ranging from 20% to 100% of the principal within 30 days, prosecutors said.

Kagel claimed to possess 1,000 Bitcoin (BTC) in a wallet worth $11 million in January 2018, saying it was being held in escrow to guarantee investments. He also falsely claimed to have prior cryptocurrency investment experience.

In 2023, the California Supreme Court revoked Kagel’s law license for failing to respond to disciplinary charges, stating that he misappropriated $25,000 in client funds. At that point his law license had already been suspended twice before, in 1997 and 2012.

Edited by Stacy Elliott.