Former New Jersey Corrections Officer Admits Role In Cryptocurrency Fraud Scheme That Targeted Law Enforcement, Fire Personnel, And Other First Responders

NEWARK, N.J. – A former New Jersey corrections officer admitted orchestrating two different fraud schemes, including a cryptocurrency scheme that resulted in losses of more than $600,000, U.S. Attorney Philip R. Sellinger announced today.

John DeSalvo, 47, of Linwood, New Jersey, pleaded guilty before U.S. District Judge Brian R. Martinotti in Newark federal court on March 25, 2023, to a two-count Information charging him with two counts of securities fraud.

“This defendant preyed on unwitting public servants to trick them into investing their hard-earned savings in a sham token he dubbed ‘the crypto pension’, which he then stole for his personal use. My office will relentlessly pursue these kinds of scammers so that we can work with our partners to bring fraudsters to justice.”

U.S. Attorney Philip R. Sellinger

“DeSalvo admits his role in two fraud schemes, one of which involved him creating and marketing a crypto token to first responders that could supplement their existing pensions,” FBI – Newark Special Agent in Charge James E. Dennehy said.  “Police officers, firefighters, EMTs, and other first responders show up each day to serve and protect, hoping their hard-earned pensions will allow for a nice retirement one day. Many of his victims ended up losing their entire investments. He's now facing the justice he deserves."

According to the documents filed in this case and statements made in court:

The Blazar Token Fraud

DeSalvo was the creator and promoter of a digital token known as “Blazar Token,” (Blazar) which DeSalvo marketed to police, fire personnel, EMTs, and other first responders as a “crypto pension” that could be used to supplement investors’ existing pension plans. DeSalvo promised investors that Blazar would offer “more stability than any other token” and that the value of Blazar would “continue to rise over time similar to any investment fund, only at a much higher rate of success.”

Beginning in late 2021, DeSalvo used social media platforms to fraudulently solicit investments in Blazar through a series of misrepresentations including that Blazar was in the process of becoming, or was already, a securitized token approved by the Securities and Exchange Commission; and Blazar could be purchased through payroll deductions and/or ACH transactions. DeSalvo also falsely told investors that Blazar had been approved for inclusion on several well-known cryptocurrency exchanges and guaranteed investors rates of return of more than 20 percent with “ZERO risk.”

In total, DeSalvo raised more than $620,000 from more than 200 investors in Blazar.  After receiving investor funds, DeSalvo frequently used the funds for various illicit purposes unrelated to Blazar including personal expenses, day-trading in various volatile cryptocurrencies, and payments to prior investors in the manner of a Ponzi scheme.

In May 2022, DeSalvo sold off more than 41 billion of his own Blazar tokens, which caused the price of the token to drop precipitously. The value of Blazar never recovered, causing most investors to lose their entire investments.

The Brokerage-1 Fraud

Between January 2021 and May 2021, DeSalvo managed and solicited investment in an investment group through Brokerage-1, an online trading platform. DeSalvo marketed the investment group largely through social media posts in which DeSalvo falsely touted his success as an investor. For example, DeSalvo claimed to potential investors, “I have been averaging close to 1200% over the last 2 years. I am in the top 1,000^th percent in the world. That’s the truth, the return rates I have been averaging are so high that I have people throwing money at me to invest.”

In total, DeSalvo solicited approximately $100,000 in investments from approximately 20 individuals for the investment group. After receiving the funds, DeSalvo engaged in trading activities for a brief period of time before transferring all the funds out of the investment group’s account at Brokerage-1 and into personal accounts held by DeSalvo at Brokerage-1 and Coinbase. DeSalvo then used the funds for various non-investment purposes such as credit card payments, personal trading in volatile cryptocurrencies, and payments to a contractor who performed work on DeSalvo’s personal residence.

After draining the investment group’s account, DeSalvo advised the investment group investors that their funds had been lost due to poor market conditions and provided the investors with false trading records purporting to show the trading activity that DeSalvo engaged in on behalf of the investment group.

The counts of securities fraud carry a maximum potential penalty of 20 years in prison and a fine of $5 million. Sentencing is scheduled for Aug. 6, 2024.

The U.S. Securities and Exchange Commission (SEC) also previously filed a civil complaint against DeSalvo based on the same conduct.

U.S. Attorney Sellinger credited special agents of the FBI’s Atlantic City Resident Agency, under the direction of Special Agent in Charge James E. Dennehy in Newark and detectives from the New Jersey Division of Criminal Justice, Cyber Crimes Bureau, under the direction of Director Stephen Ferketic, with the investigation leading to the guilty plea. 

The government is represented by Assistant U.S. Attorney Anthony Torntore, Chief of the U.S. Attorney’s Cybercrime Unit in Newark.