John A. DeSalvo, a former lieutenant at the New Jersey Department of Corrections, faces charges brought by the U.S. Securities and Exchange Commission (SEC) for his alleged involvement in a crypto scam that specifically aimed at police officers and first responders. The bizarre scheme involved raising funds through sales of his own token and orchestrating a pump-and-dump strategy.
Targeting Police Officers and First Responders
John A. DeSalvo stands accused of orchestrating a crypto scam that specifically targeted police officers and first responders. According to the SEC (1), DeSalvo allegedly raised $623,388 from 222 investors between November 2021 and May 2022 through the sale of his own token named Blazar. DeSalvo enticed potential investors by asserting that Blazar would revolutionize state pension systems for police, firefighters, and paramedics, promising substantial returns.
False Claims and Misleading Statements
DeSalvo allegedly made false claims to investors, touting Blazar as the first token that could be purchased through weekly payroll deductions, akin to contributions into traditional pension plans. He also claimed that Blazar had obtained the status of a “securitized token with the SEC,” despite lacking official registration with the regulatory body. Such misleading statements were designed to create a false sense of legitimacy.
Pump and Dump Strategy
DeSalvo’s deceptive actions escalated when he launched Blazar on the decentralized exchange PancakeSwap in May 2022. Despite earlier assertions of an initial “lock-up” period for insiders, DeSalvo swiftly sold a substantial amount of Blazar tokens, worth $51,000 at the time. As DeSalvo sold his tokens, he prevented other investors from selling theirs. Consequently, the value of the Blazar token plummeted by over 99.9% within a span of two weeks, leading to significant losses for investors.
Impact and Consequences
The SEC’s investigation revealed that DeSalvo’s large-scale token sales on PancakeSwap had severe repercussions. The substantial sell-off placed immense downward pressure on the trading price of the Blazar token, causing a collapse in its value. Furthermore, the liquidity of PancakeSwap was significantly drained due to DeSalvo’s actions, exacerbating investor losses.
In response to these alleged fraudulent activities, the SEC seeks a permanent injunction against DeSalvo, aiming to prohibit him from participating in security offerings. The regulatory body also pursues civil penalties and disgorgement of profits. The charges against DeSalvo highlight the SEC’s commitment to safeguarding investors from deceptive schemes within the cryptocurrency space.