Amir Elmaani, the 31-year-old founder of Oyster Protocol, has been handed a maximum prison sentence of four years for tax evasion.
In a Tuesday announcement, the United States Attorney’s Office said that Elmaani, also known by the alias “Bruno Block,” received this sentence after pleading guilty on April 6.
As part of his guilty plea, he admitted to creating and selling Pearl tokens without paying taxes on substantial profits derived from the project.
Elmaani confessed to causing tax losses exceeding $5.5 million.
“Amir Elmaani violated the duty he owed to pay taxes on millions of dollars of cryptocurrency profits, and he also violated the trust of investors in the cryptocurrency he founded,” District Attorney Damian Williams said in a comment.
“Participants in the cryptocurrency markets must play by the rules, and this Office will be tireless in prosecuting those who do not.”
Elmaani’s fraudulent activities trace back to September and October 2017 when he actively promoted a cryptocurrency called Pearl (PRL).
The digital asset was marketed as a means for investors to acquire data on Oyster Protocol, a blockchain-based data storage platform.
Elmaani Used Smart Contracts to Mint New PRL Tokens Before Dumping Them
In October 2018, Elmaani surreptitiously minted a large number of new PRL tokens and subsequently dumped them on the market.
“On or about October 29, 2018, I used the smart contract to mint new PRL, without telling anyone, including others who worked on the Oyster Protocol project,” he said in his plea deal.
“I then sold these newly minted PRL on a digital trading platform.”
He further admitted that the counterparties purchasing these newly minted PRL tokens were likely unaware of the increased total supply.
Despite amassing substantial profits from this exit scheme, Elmaani filed a tax return in 2017 claiming a meager $15,000 in earnings from a patent design business.
Furthermore, he reported zero income to tax authorities in 2018.
However, investigations revealed that in 2018, Elmaani spent over $10 million on multiple yachts, $1.6 million at a carbon-fiber composite company, significant amounts at home improvement stores, and more than $700,000 in the acquisition of two homes.
One property was purchased through a shell company, while the other was registered under the names of two of Elmaani’s associates.
Prosecutors also discovered that Elmaani engaged extensively in trading precious metals and kept gold bars in a safe on one of his yachts.
Prosecutors further revealed that Elmaani employed friends and family as nominees to receive cryptocurrency proceeds and transfer them or convert them into U.S. currency, evading proper reporting and taxation.
In addition to the four-year prison sentence, Elmaani was sentenced to one year of supervised release and ordered to pay $5.5 million in restitution.