The founders of cryptocurrency exchange Bitqyck have been sentenced to eight years in prison for tax evasion after raising $24 million in an ICO and for defrauding investors.
Bitqyck founders Bruce Bise and Samuel Mendez were charged with tax evasion in August 2021, according to the U.S. Department of Justice website. Bize and Mendes promoted the Bitqy token as a way to get rich for “people who missed the opportunity to invest in bitcoin.” In 2016, Bitqyck held an initial coin offering (ICO), during which it raised about $24 million from over 13,000 investors. In an attempt to legitimize the sale of Bitqy and stay out of US securities laws, the firm marketed its token as a “gift” that users receive for certain online purchases.
According to the Bitqyck White Paper, each Bitqy token was provided with 1/10 of the company’s shares. However, Bize and Mendez admitted that they never actually distributed shares to token holders, and this task was not built into Ethereum smart contracts.
Nine months after the launch of Bitqy, Bize and Mendez started selling another token, BitqyM. They claimed that the purchase of BitqyM allowed investors to participate in “Bitcoin mining operations” in Washington state. In fact, as Bize and Mendez later admitted, no mining farm existed. Unbeknownst to the investors, the defendants entered into a contract for bitcoin mining with a foreign company. It turned out that the founders of Bitqyck used the raised funds for personal expenses, including casinos, the purchase of luxury cars, furniture and art.
According to court documents, the founders of Bitqyck also provided incorrect information to the United States Internal Revenue Service (IRS). On his 2016 and 2017 tax returns, Bize deliberately underreported his income, and the state lost $371,278 in tax losses. Mendez did the same thing, with $311,155 in tax losses for the same period. In 2018, Bitqyck did not file any tax returns at all, despite to raise $3.5 million from investors. The total US government tax loss resulting from Bize and Mendez’s actions is $1.6 million.
Byse and Mendez pleaded guilty last fall, and in March they were sentenced to 50 months in federal prison. In 2019, the founders of Bitqyck agreed to pay an $8.3 million fine to settle claims from the US Securities and Exchange Commission (SEC). Bize was ordered to pay $890,254 and Mendez was ordered to pay $850,022.
Source: Bits
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