A disbarred California attorney pleaded guilty yesterday to conspiring to operate a cryptocurrency Ponzi scheme that defrauded victims of more than $9.5 million.

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned. The scheme lures investors in with promises of high returns with little or no risk.

According to court documents, David Kagel, 85, formerly of Beverly Hills, conspired to fraudulently induce victims to participate in a cryptocurrency Ponzi scheme. Kagel and his co-conspirators promoted investment programs that falsely guaranteed high-yield profits and promised to use artificial intelligence trading bots to trade victims’ investments in cryptocurrency markets.

The Ponzi scheme promoter falsely told victims that Kagel, as the promoter’s attorney, held Bitcoin then equivalent to approximately $11 million in escrow that guaranteed victims’ investments against loss for any reason. To create a false sense of security and trust, Kagel provided letters to victims on his firm’s letterhead to fraudulently confirm the promoter’s false statements. Kagel admitted that he and his co-conspirators used victims’ funds for their own personal benefit. 

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Kagel pleaded guilty to one count of conspiracy to commit commodity fraud. He is scheduled to be sentenced on Sept. 10 and faces a maximum penalty of five years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

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David Gilbert Saffron, 51, of Australia, and Vincent Anthony Mazzotta Jr., 52, of Los Angeles, were charged by a federal grand jury in a superseding indictment in December 2023 for their roles in the same cryptocurrency Ponzi scheme, and are awaiting trial that is scheduled to begin on Aug. 13. Saffron and Mazzotta allegedly promoted the investment programs under various names including Circle Society, Bitcoin Wealth Management, Omicron Trust, Mind Capital, and Cloud9Capital.

Rather than investing victims’ funds in cryptocurrency, Saffron and Mazzotta allegedly misappropriated victims’ funds to pay for personal expenses including private chartered jet flights, luxury hotel accommodations, private mansion rentals, a personal chef, and private security guards.