Crypto cofounder revealed fraudster investors shaken

crypto cofounder revealed fraudster investors shaken

Investors are shaken after the co-founder of a multi-billion dollar cryptocurrency protocol was accused of being a serial scammer with a record of conviction and deportation, and the co-founder of a fraudulent Canadian exchange that imploded.

On Thursday, a Twitter user who goes by zachxbt.eth “with a track record of unmasking crypto scams and nefarious behavior,” according to CoinDesk, accused “Sifu,” a core member of the founding team behind the popular Avalanche-based Wonderland DeFi (or decentralized finance) protocol and its TIME token, of actually being Michael Patryn.

Patryn, who changed his legal name twice, was the co-founder of QuadrigaCX, a Canadian exchange that shut down after Patryn’s partner Gerald Cotten suddenly died in India in 2018 while owing users around $190 million in crypto at the time’s exchange rate. Patryn and Cotten reportedly parted ways in 2016.

Crypto co-founder revealed to be infamous fraudster investors shaken

Another $28 million was lost by Cotten on third-party crypto platforms, and only $46 million was recovered.

Since the revelation, sleuths have been working through accounts associated with Patryn’s known Ethereum address, helpfully labeled by Patryn himself as Sifu.eth. Taylor Monahan, CEO of MyCrypto, revealed that an address that received 15,000 ETH from QudrigaCX’s smart contract nearly five years ago—after Patryn dissociated from the exchange—was linked to the Sifu.eth address.

The QuadrigaCX episode was dramatic and painful, and emblematic of the worst parts of the cryptocurrency industry.


Which is why the community was shocked to learn that the co-founder of QuadrigaCX went on to work on another crypto project. Wonderland’s token, TIME, is supposed to be a “stablecoin” in the DeFi ecosystem that is backed by a treasury of funds locked in by users.

These indictments reflect our deep commitment to prosecuting individuals involved in cryptocurrency fraud and market manipulation.”

“Our office is committed to protecting investors from sophisticated scammers seeking to capitalize on the relative novelty of digital currency,” said U.S. Attorney Juan Antonio Gonzalez for the Southern District of Florida.
“As with any emerging technology, those who invest in cryptocurrency must beware of profit-making opportunities that appear too good to be true.”

“These cases serve as a crucial reminder that some con artists hide behind trendy buzzwords, but at the end of the day they are simply seeking to separate people from their money,” said U.S. Attorney Tracy L. Wilkison for the Central District of California.

Crypto cofounder revealed fraudster investors shakenbai

Investors are shaken after the co-founder of a multi-billion dollar cryptocurrency protocol was accused of being a serial scammer with a record of conviction and deportation, and the co-founder of a fraudulent Canadian exchange that imploded.

On Thursday, a Twitter user who goes by zachxbt.eth “with a track record of unmasking crypto scams and nefarious behavior,” according to CoinDesk, accused “Sifu,” a core member of the founding team behind the popular Avalanche-based Wonderland DeFi (or decentralized finance) protocol and its TIME token, of actually being Michael Patryn.

Patryn, who changed his legal name twice, was the co-founder of QuadrigaCX, a Canadian exchange that shut down after Patryn’s partner Gerald Cotten suddenly died in India in 2018 while owing users around $190 million in crypto at the time’s exchange rate. Patryn and Cotten reportedly parted ways in 2016.

The Department of Justice, together with federal law enforcement partners, today announced criminal charges against six defendants in four separate cases for their alleged involvement in cryptocurrency-related fraud, including the largest known Non-Fungible Token (NFT) scheme charged to date, a fraudulent investment fund that purportedly traded on cryptocurrency exchanges, a global Ponzi scheme involving the sale of unregistered crypto securities, and a fraudulent initial coin offering.

“The Department of Justice and our partners are dedicated to using every available tool to protect consumers and investors from fraud and manipulation,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division.

Later, investigators determined that Cotten was operating QuadrigaCX as a Ponzi scheme near the end of its life.

Patryn has been convicted of several crimes, including computer fraud and bank and credit fraud, as Bloomberg reported in 2019. After the original tweets that revealed Sifu is Patryn, Daniele Sestagalli, the founder of Wonderland, confirmed the allegation.

Sestagalli is a prolific developer who is behind multiple DeFi projects, including Abracadabra’s Magic Internet Money (MIM) token.

“I want everyone to know that I was aware of this and decided that the past of an individual doesn’t determine their future.

He also had pleaded guilty to burglary and grand theft charges and had been deported to Canada.

Patryn founded the crypto exchange QuadrigaCX with Gerald Cotten in 2013 but jumped ship three years later. The trading platform collapsed in 2019. Investors lost $169 million.

Cotten died in 2018.

He changed his name twice — from Omar Dhanani to Omar Patryn in March 2003, and then in 2008, to Michael Patryn, Bloomberg reported,

In the U.S., Patryn was charged with several crimes, including pleading guilty to conspiracy to commit credit and bank card fraud in 2005. He allegedly operated a website called shadowcrew.com, now defunct, peddling 1.5 million stolen credit and bank card numbers.
He was deported to Canada.

TheStreet has tried to contact Patryn online.

I choose to value the time we spent together without knowing his past more than anything,” Sestagalli wrote on Twitter.

He later posted a statement explaining that he found out about Sifu’s real identity a month ago, and has now decided to ask Patryn to step down.

“I am of the opinion of giving second chances, as I have mentioned on Twitter. I’ve seen the community very divided about my choice of maintaining him as the treasury manager after finding out who he was and his past,” Sestagali wrote.

“Regardless, what has happened has happened. Now having taken some time to reflect, I have decided that he needs to step down till a vote for his confirmation is in place. Wonderland has the say to who manages its treasury not me or the rest of the wonderland team.”

QuadrigaCX was a popular Canadian cryptocurrency exchange co-founded by Patryn, who reportedly left in 2016.

His whereabouts are unknown.

The new revelation has sent a thunderbolt through the industry, which is trying to reassure regulators and lure in mainstream investors.

Wonderland’s native token, Time, recent was more than 23% lower. The token has lost 96.6% of its market value since its all-time record of $10,063.72 of Nov.

7, according to CoinGecko.

Investors are now turning away from projects related to Wonderland. This is the case of Popsicle Finance, a liquidity provider, and Abracadabra Money, which enables investors to participate in the ever-growing number of protocols that offer high yield staking pools.

Popsicle’s native token, ICE, has lost 93.7% of its market value since its Nov.
6 all-time high, while Abracadabra’s native token – Spell Token – is down 85% from its Nov.

HSI will continue to investigate criminal organizations operating in emerging technologies and are proud to have worked with the Department of Justice Fraud Section to put an end to this criminal activity.”

The following charges are announced today as a part of this national enforcement action.

Crypto NFT Scheme:

United States v. Le Ahn Tuan:

Le Anh Tuan, 26, a Vietnamese national, was charged with one count of conspiracy to commit wire fraud and one count of conspiracy to commit international money laundering in the Central District of California in connection with a scheme involving the “Baller Ape” NFT.

As alleged in the indictment, Tuan was involved in the Baller Ape Club, an NFT investment project that purportedly sold NFTs in the form of various cartoon figures, often including the figure of an ape.

Fraud Section Trial Attorneys Kevin Lowell and Tian Huang are prosecuting the case.

Crypto Ponzi and Unregistered Securities Scheme:

United States v. Emerson Pires, Flavio Goncalves, and Joshua David Nicholas:

Emerson Pires, 33, and Flavio Goncalves, 33, both of Brazil, and Joshua David Nicholas, 28, of Stuart, Florida, were each charged in the Southern District of Florida with one count of conspiracy to commit wire fraud and one count of conspiracy to commit securities fraud in connection with a global cryptocurrency-based Ponzi scheme that generated approximately $100 million from investors.
Pires and Goncalves also were charged with conspiracy to commit international money laundering.

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