Officials stated that a disbarred California attorney pleaded guilty yesterday to conspiring to operate a cryptocurrency Ponzi scheme that defrauded victims of more than $9.5 million.
According to court documents, David Kagel, 85, formerly of Beverly Hills, conspired to fraudulently induce victims to participate in a cryptocurrency Ponzi scheme.
Kagel and his co-conspirators promoted investment programs that falsely guaranteed high-yield profits. He promised to use artificial intelligence trading bots to trade victims’ investments in cryptocurrency markets, according to authorities.
The Ponzi scheme promoter falsely told victims that Kagel, as the promoter’s attorney, held Bitcoin, then equivalent to approximately $11 million, in escrow, which guaranteed victims’ investments against loss for any reason.
Kagel fraudulently confirmed the promoter’s false statements by sending victims letters on his firm’s letterhead to create a false sense of security and trust.
Kagel admitted that he and his co-conspirators used the victims’ funds for their benefit.
“David Kagel abused his position as an attorney to earn the trust of investors and to endorse false statements about a purported cryptocurrency investment that was, in fact, a scam. Kagel and his co-conspirators defrauded their victims out of millions of dollars and used the victims’ money to line their own pockets,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “When lawyers lend a veneer of legitimacy to fraudulent schemes, it can lead to devastating losses for victims.”
Kagel pleaded guilty to one count of conspiracy to commit commodity fraud. He is scheduled to be sentenced on Sept. 10 and faces up to five years in prison.
David Gilbert Saffron, 51, of Australia, and Vincent Anthony Mazzotta Jr., 52, of Los Angeles, were charged by a federal grand jury in a superseding indictment in December 2023 for their roles in the same cryptocurrency Ponzi scheme, and are awaiting trial that is scheduled to begin on Aug. 13.
Saffron and Mazzotta allegedly promoted investment programs under various names, including Circle Society, Bitcoin Wealth Management, Omicron Trust, Mind Capital, and Cloud9Capital.
Rather than investing victims’ funds in cryptocurrency, Saffron and Mazzotta allegedly misappropriated victims’ funds to pay for personal expenses, including private chartered jet flights, luxury hotel accommodations, private mansion rentals, a personal chef, and private security guards.
IRS-CI is investigating the case.
Trial Attorney Theodore Kneller of the Criminal Division’s Fraud Section is prosecuting the case.