The criminal proceedings against John Michael Caruso and Zachary Salter, the individuals behind fraudulent cryptocurrency scheme Zima Digital Assets, continue at the Arizona District Court. Caruso, also known as Kryp+0 K!ng, continues to push for reconsideration of his detention. His latest arguments include claims that he is so rich that he should not be detained.
On January 25, 2021, the United States Government filed its opposition to Caruso’s claims.
Let’s recall that, about a year ago, the US authorities filed a complaint against Caruso and Salter, charging them with one count of conspiracy to commit wire fraud and money laundering. On January 30, 2020, Caruso was arrested on the federal charge. Shortly after that, Caruso was detained pending trial after holding a detention hearing. Ever since, the so-called “crypto king” has been trying to reopen detention hearing.
In Caruso’s latest motion seeking his release, he presents a new theory – namely, that he’s rich. Super rich.
He argues that he controls numerous cryptocurrency wallets, two of which were recently valued at over $850 million.
In subsequent emails between counsel, Caruso claims he’s a billionaire. He argues that his wealth “provide[s] a change of circumstances in this case, [and is] evidence that was not available at the time of the original detention hearing or the first motion to reopen detention hearing.” Caruso concludes that his vast wealth eliminates any risk of flight because “repayment of the investors would be no issue.”
The Government says that Caruso’s purported wealth isn’t material to any issues regarding detention. If his claims are taken at face value, he controls over $1 billion in numerous cryptocurrency wallets. This money can be accessed from anywhere in the world and isn’t regulated. If Caruso’s claims are to be believed, he has more than sufficient means to flee the United States.
The US Government also notes that there still is no evidence of any significant amounts of cryptocurrency held in cold storage, nor has Caruso identified any since his arrest last January. Caruso’s defense counsel claimed in an August email that she was “in the process of hiring an expert to evaluate what is on the cold storage devices,” but he has yet to identify any actual cryptocurrency in cold storage.
Moreover, the story of where Caruso holds his alleged millions in cryptocurrency keeps changing.
Put briefly, the defendant’s “evidence” of wealth is unpersuasive, the Government says, and requests that the Court deny Caruso’s motion for release.
The Indictment against Caruso and Salter alleges that the duo operated purported cryptocurrency investment fund Zima Digital Assets. The scheme, in reality, was a fraud. Caruso and Salter got more than $9 million from the victims but the money was not used for the purchase of cryptocurrency or other “blockchain based assets”. In fact, Caruso and Salter returned about $2 million of the deposits to early investors as purported investment profits.
The rest of the money they spent on private jets, vacations, luxury car rentals, and casino gambling. Bank records and casino records establish that Caruso has lived an extravagant lifestyle since June 2018. During this relatively short period, he took 30 trips to Las Vegas.
The Indictment notes a series of misrepresentations used by the defendants, including false statements in the contracts with the investors and false claims in direct messages to investors.