A California man was arrested Monday on charges of cheating investors out of about $11 million in a cryptocurrency scheme that used celebrities, including actor Steven Seagal, to endorse the business, according to court papers and sources.
Among the victims of John DeMarr, 55, of Santa Ana, California, were unnamed residents of the Eastern District of New York, which includes Long Island, Brooklyn, Queens and Staten Island, court papers said.
DeMarr, who promised investors significant returns, will be arraigned in federal District Court in Brooklyn at a later date after a removal hearing at a federal court in California.
Instead of using investors' money for the supposed cryptocurrency companies, known as "Start Options" and "B2G," DeMarr "spent the money on a lavish lifestyle he maintained, which included the purchase of expensive jewelry, a Porsche and the remodeling of his California home," officials said.
The scheme operated from November 2017 to May 2018, officials said.
When angry investors, who had been promised large returns, tried to track him down and get their money back, DeMarr had associates spread false stories that he had been robbed of millions of dollars when he disappeared in Montenegro in May 2018, officials said. In fact, DeMarr had been living in California, officials said.
"DeMarr made misrepresentations and false promises that coaxed investors into pouring millions of dollars into fraudulent cryptocurrency schemes, all to facilitate his extravagant lifestyle," acting U.S. Attorney for the Eastern District Seth DuCharme said in a statement. "We will continue to root out and prosecutor those who would cheat investors to line their own pockets."
Seagal was not charged in the criminal case, and he was not identified by name in the DeMarr complaint. But sources identified him as one of the celebrity endorsers.
Seagal settled civilly in February with the Securities and Exchange Commission for a $300,000 penalty for promoting DeMarr’s operation, a spokesman for the actor and court papers have said.
Seagal was accused of violating the anti-touting provisions of federal law for not disclosing he was being paid to endorse a part of DeMarr’s business, officials said.
A spokesman for Seagal said at the time he "became concerned" and eventually dropped out of his role.
Another celebrity endorser used to promote DeMarr’s scheme was Andrew Bogut, a former NBA professional basketball player, sources said. But he had nothing to do with DeMarr’s operation, and his name and picture were used without his permission, sources said.
DeMarr’s attorney could not be reached for comment.