The owners of a cryptocurrency firm have pleaded guilty to tax evasion in connection with the 2016 Bitqyck initial coin offering (ICO) which raised $24 million and are facing up to five years in federal prison.
Bitqyck founders Bruce Bise and Samuel Mendez who raised approximately $24 million from more than 13,000 investors have pleaded guilty to tax evasion, the U.S. Attorney for the Northern District of Texas said Wednesday, adding:
"Mr. Bise and Mr. Mendez admitted that Bitqyck raised approximately $24 million from more than 13,000 investors. Instead of fulfilling their promises to these investors, the defendants used Bitqyck funds on personal expenses, including casino trips, cars, luxury home furnishings, art, and rent."
Acting U.S. Attorney Chad Meacham said:
“These crypto-savvy defendants exploited an emerging technology, lying to their investors, pocketing the proceeds, and concealing the income from the IRS,”
A white paper posted on the Bitqyck website promised investors that each Bitqy token came with 1/10th of a share of Bitqyck common stock though no such issues were ever made.
About nine months after launching Bitqy, Bise and Mendez began promoting another token, Bitqym that claimed to power “Bitcoin mining operations.” in Washington state. In reality, the pair admitted that no such mining facility ever existed and they had unsuccessfully tried to contract a third-party overseas company to mine the promised bitcoin.
Furthermore, Bise and Mendez underreported their income to the IRS in 2016 and 2017. A year later, Bitqyck failed to file any corporate tax returns at all despite netting more than $3.5 million from investors.
From 2016 to 2018, Bise and Mendez profited a combined $9.16 million, but after underreporting their incomes, combined with Bitqy failing to file its tax returns in 2018 despite collecting $3.5 million from investors, the founders owed over $1.6 million in back taxes combined. The U.S. Department of Justice added that as part of that settlement, Bise and Mendez “agreed to pay disgorgement and penalties of $890,254 and $850,022, respectively.”