David Kagel, an 86-year-old former California attorney, has been sentenced to five years of probation and is required to pay nearly $14 million in restitution after admitting to his involvement in a multi-million-dollar cryptocurrency Ponzi scheme. The sentencing took place on October 8 in Las Vegas Federal Court by Judge Gloria Navarro.
Kagel’s Health and Sentencing Conditions
Kagel, who is currently in hospice care at a senior facility in Las Vegas due to poor health, will serve his probation at this location. Should his health improve enough to permit his departure from hospice care, he will be mandated to wear a monitoring device to ensure compliance with probation terms.
Prosecutors detailed that from December 2017 to around June 2022, Kagel, alongside two accomplices, David Saffron and Vincent Mazzotta, orchestrated a fraudulent crypto trading scheme. They employed a so-called crypto bot to allure investors with promises of high returns and no risk, successfully obtaining approximately $15 million from unsuspecting investors for various cryptocurrency trading programs.
Kagel leveraged his professional credibility by using his law firm’s letterhead to communicate with potential investors, thereby gaining their trust. These communications often contained assurances of high returns, with Kagel falsely claiming that the investments were backed by substantial crypto assets, including an alleged holding of 1,000 Bitcoin valued at $11 million in escrow.
False Promises and Guarantees
The scheme promised investors a return of 20% to 100% on their principal investment within 30 days—a “guarantee” that was both unsustainable and deceptive. Additionally, Kagel misled investors about his previous investments in crypto, falsely enhancing his reputation and trustworthiness as a broker.
The California Supreme Court revoked Kagel’s law license in 2023 after he failed to respond to disciplinary charges regarding the misappropriation of $25,000 in client funds. This was not his first brush with professional misconduct; his license had been previously suspended in 1997 and again in 2012.
While Kagel has pleaded guilty, his co-defendants, Saffron and Mazzotta, have pleaded not guilty and are scheduled to face trial in April next year in a Los Angeles federal court.
Victim Impact and Recovery Efforts
The scheme has left numerous victims in its wake, many of whom were misled by the legitimacy inferred from Kagel’s use of his law firm’s resources. Recovery efforts for these victims will be complex, given the amount of money involved and the deceitful nature of the investments.
The Kagel case highlights the vulnerabilities within the cryptocurrency investment landscape, where the promise of high returns can often mask the realities of high risk. This case serves as a cautionary tale for investors to conduct due diligence and for regulators to maintain stringent oversight of cryptocurrency investments.
As the cryptocurrency sector continues to grow, the potential for similar fraudulent schemes remains significant. Investors are urged to be cautious and to look for signs of credibility and transparency in investment opportunities, particularly in offers that seem too good to be true.
The sentencing of David Kagel marks a significant development in the legal pursuit of justice in cryptocurrency-related fraud. It underscores the importance of regulatory and legal frameworks that need to keep pace with technological advancements to protect investors from sophisticated financial scams.
