Crypto Scammers Sentenced to Combined Eight Years in Federal Prison.

The founders of a Dallas cryptocurrency company called Bitqyck were sentenced last week to federal prison for tax evasion.

Bruce Bise and Samuel Mendez were first charged in August 2021. Bise pleaded guilty in September and was slapped with a 50 month federal prison sentence last week. Mendez pleaded guilty in October and was also sentenced to 50 month in prison.

The Department of Justice said in a press release that the owners admitted to raising around $24 million from more than 13,000 investors. They used that money on personal expenses like casino trips, cars, art and rent.

“Crypto actors are required to pay their fair share of taxes, just like everyone else,” U.S. Attorney Chad Meacham said in a statement. “Not only did these defendants shirk their tax obligations, they lied to investors and made off with their millions. Anyone else contemplating such a scheme should know that the Justice Department and its law enforcement partners have a sharp eye on the cryptocurrency space, and we will not let criminal behavior slide.”

In the company’s marketing material, they said their cryptocurrency, called Bitqy, was a way for “those individuals who missed out on Bitcoin” to get rich.

In 2016, they held their initial coin offering. This is when investors could first purchase the cryptocurrency. The people who bought it were betting it would increase in value.

To legitimize the Bitqy tokens, Bise and Mendez characterized them as “earned gifts” which would reward people for purchasing certain items online.

Investors were also promised each token came with a 10th of a share of the company’s common stock, but Bise and Mendez admitted in court documents that shares weren’t distributed to token holders. Instead, Bise and Mendez held on to all of the common stock.

Some nine months after launching their first token, the two started marketing another one, BitqyM. Each token costed $1 and the company claimed it allowed investors to essentially buy in to “Bitcoin mining operations.” The money investors put into buying BitqyM would fund a Bitcoin mining operation in Washington state, they were told. But that mining operation didn’t exist, the owners said in court documents. They instead hired a third-party company overseas to try to mine the Bitcoin they promised investors.

“These criminals committed this scheme to thoroughly deceive and defraud stakeholders and the taxpaying public by cheating cryptocurrency investors,” Christopher J. Altemus Jr., special agent in charge at Dallas’ FBI Field Office, said in a statement.

Authorities say the two owners used the company’s income for their own purposes at their shareholders’ expense. Bise and Mendez took in around $4.68 million and $4.48 million respectively. They also say Bise and Mendez didn’t report all their income to the IRS, resulting in a tax loss of some $1.6 million.

The two also reached a civil settlement with the Securities & Exchange Commission and the company agreed to pay $8.3 million to resolve claims that their company defrauded investors and operated an unregistered digital asset exchange. Bise and Mendez also paid over $1,740,000 collectively as part of the settlement.

"Because digital investment assets represent a new and exciting technology, they can be very alluring, especially if investors believe they are getting in on the ground floor and will own part of the operations,” David Peavler, director of the SEC’s Fort Worth Regional Office, told the Observer in October. Peavler helped investigate the civil case against Mendez and Bise.

He said Bise and Mendez "took advantage of investors’ appetite for these investments and fraudulently raised millions of dollars by lying about their business."