Feds indict brothers in Bradford cryptocurrency scheme | Information

BRADFORD, Pa. — Shane and Sean Hvizdzak have been indicted by a federal grand jury in Erie on fees of conspiracy to commit wire fraud, wire fraud and cash laundering in reference to an alleged multimillion greenback cryptocurrency scheme.

Appearing U.S. Legal professional Stephen R. Kaufman introduced the sweeping indictments of the brothers, who have been born and raised in Bradford.

The 65-count indictment alleges Shane Hvizdzak, 33, of Bradford, and Sean Hvizdzak, 35, an lawyer who lives in St. Marys, conspired to defraud buyers in a restricted partnership that was represented as an funding in cryptocurrency.

“Investor funds weren’t invested within the method represented to buyers however have been reasonably diverted into the defendants’ private accounts and supplied to entities having nothing to do with cryptocurrency,” the U.S. Legal professional’s press launch said. “The defendants additionally supplied false details about the purported funding’s efficiency to induce new buyers to turn into concerned and in addition lull these buyers who had already turn into concerned right into a false sense of safety.

“The funds of subsequent buyers have been additionally supplied to preliminary buyers and misrepresented as returns on their funding,” the discharge said.

Kaufman stated legislation gives for a theoretical most whole sentence of 810 years in jail, a nice of $12.5 million or each for Shane Hvizdzak and a most whole sentence of 550 years in jail, a nice of $7 million or each for Sean Hvizdzak.

“Underneath the federal sentencing tips, the precise sentence imposed can be based mostly upon the seriousness of the offenses and the prior felony historical past, if any, of the defendant,” the press launch said.

Assistant U.S. Legal professional Christian A. Trabold is prosecuting the case on behalf of the federal government.

The Federal Bureau of Investigation and Inner Income Service felony investigators carried out the investigation resulting in the indictment.

The case got here to public gentle in June 2020, when the federal Securities and Change Fee filed a grievance in opposition to the Hvizdzaks, together with an organization the 2 co-owned, Excessive Avenue Capital LLC of Bradford. The grievance on the time alleged the 2 took cash from buyers, stated it was being invested in digital belongings and fabricated statements saying the investments have been incomes big returns. Nonetheless, the SEC alleges the brothers took about $31 million from buyers, put it of their private accounts after which moved it exterior the US.

Sean Hvizdzak has maintained his innocence, whereas Shane Hvizdzak has claimed his Fifth Modification proper in opposition to self-incrimination by means of filings within the the SEC case, which had been a civil matter.

This previous June, Shane Hvizdzak’s lawyer had requested a keep within the proceedings, acknowledging {that a} felony case involving the identical allegations was imminent. A deposition given within the civil case would have a detrimental impression on his Fifth Modification rights within the felony case, lawyer Efrem Grail had argued.

On June 23, Sean Hzivdzak filed a joinder in request of a keep within the case, however famous his request was for a distinct purpose than his brother’s. He alleged that testimony and paperwork from his brother are needed to indicate his innocence within the matter, however his brother had invoked his Fifth Modification rights, thereby depriving Sean Hvizdzak of data essential to his protection.

A federal choose granted a keep within the civil proceedings in opposition to the brothers over the objection of the SEC.

The SEC has indicated that of the $31 million that was allegedly bilked from buyers — lots of them from the Bradford space — some $7 million has been recovered.

SEC attorneys, in spelling out the alleged conspiracy, had initially indicated that Shane Hvizdzak was the first actor, although the hedge fund was in each brothers’ names.

Sean Hvizdzak’s lawyer, David Berardinelli, had argued that his consumer resigned from the hedge fund and inspired his brother to pay again buyers when he noticed what was occurring. Berardinelli’s response to the SEC submitting was there was no “large securities fraud or Ponzi scheme… and definitely none that was knowingly or deliberately perpetrated by Sean Hvizdzak.”

Nonetheless, within the amended submitting, the SEC alleged a distinct story.

Each brothers allegedly diverted buyers’ funds meant for his or her hedge fund into their private accounts, lied to CNB Financial institution when questioned in regards to the exercise in a non-hedge fund account, directed buyers to deposit funds into their private accounts and misappropriated the cash, the submitting indicated.

The submitting famous that Sean Hvizdzak had written checks to himself and his brother from the accounts the place the buyers’ cash had been despatched, and used the cash for his or her private investments. At occasions, the brothers used new buyers’ cash to pay out dividends to older buyers.

On Could 5, 2020, Sean Hvizdzak “acknowledged that (a non-fund account) had lately obtained fund investor cash.” Nonetheless, the SEC alleges, he nonetheless licensed cost of a bank card used for bills associated to constructing Shane Hvizdzak’s house on Excessive Avenue.

The brothers often mentioned the hedge fund, and the SEC alleged that Sean Hvizdzak “knew or was reckless in not figuring out that Shane was fraudulently soliciting buyers and diverting fund belongings to non-public accounts” not less than by March 23, 2020. On that day, the SEC alleged, Sean Hvizdzak instructed one other consultant of the fund that he had considerations about what was occurring within the hedge fund.

He acknowledged that his brother had lied to buyers in regards to the audits on the fund on this communication, too, the grievance alleged.

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