A federal jury in Las Vegas has convicted business owner Brent C. Kovar of running a $24 million cryptocurrency Ponzi scheme that defrauded at least 400 investors, the Justice Department announced.
Kovar owned Profit Connect, a Las Vegas-based firm that operated from late 2017 until July 2021. The company falsely claimed to utilize artificial intelligence software running on a supercomputer to mine cryptocurrency and verify network transactions. Investors were lured with promises of fixed annual returns between 15% and 30%, a full money-back guarantee, and claims that the company held hundreds of millions of dollars in crypto reserves. Kovar also falsely assured investors that their funds were insured by the Federal Deposit Insurance Corporation (FDIC).
Prosecutors established during a nine-day trial that Kovar knew the company was unprofitable, held no reserves, and could not honor its guarantees. Investor funds were instead used to operate the business, purchase employee gifts, buy a house for Kovar, and pay out earlier investors with funds from newer participants to simulate mining returns.
Following the trial, Kovar was convicted of 11 counts of wire fraud, two counts of mail fraud, and two counts of money laundering. He is scheduled to be sentenced on November 30 and faces a statutory maximum penalty of 280 years, with the final sentence to be determined by a judge under federal sentencing guidelines.
The enterprise was initially halted in July 2021 when the U.S. Securities and Exchange Commission obtained a restraining order and asset freeze against Profit Connect. While the SEC's initial figures estimated losses at up to $12 million from at least 277 investors, subsequent prosecution established the total losses at $24 million involving at least 400 investors.
