Amir Bruno Elmaani, the 31-year-old founder of the Oyster Protocol, pleaded guilty in April to tax evasion, as well as secretly minting and selling Pearl (PRL) tokens.
According to the United States Attorney's Office, Elmaani launched the Oyster Protocol in September 2017.
Put simply, the Oyster protocol is a blockchain-based data storage platform that has gained quite some traction in the few years of its existence.
The platform also used $PRL (or pearl) as a native cryptocurrency, which Elmaani marketed as a way for investors to purchase data on the platform upon launch.
Elmaani reportedly claimed that there was a fixed supply of 98.5 million $PRL tokens and that he would not sell any of his own tokens for at least one year.
This, as you might have guessed, was false.
In October 2018, Elmaani admitted to using a backdoor in the Oyster protocol's smart contract to mint (or create) new tokens for himself.
He then sold these newly minted tokens on an exchange. This massive sell-off caused an equally massive dip that defrauded unsuspecting investors.
Elmaani admitted that he was aware that the buyers of his tokens did not know he had increased the total supply of PRL.
He also admitted to acting with an intent to deceive them.
In addition to stealing money from investors, Elmaani also failed to report or pay taxes on his income.
He went as far as filing a tax return in 2017, claiming he had only earned $15,000 from a patent design business and made zero income in 2018.
Upon investigation, it was discovered that Elmaani actually earned millions of dollars from his activities and even spent lavishly on multiple yachts, houses, and jewels.
He also reportedly used shell companies and nominees to hide his assets and income from the Internal Revenue Service (IRS).
At the end of the day, Elmaani caused tax losses of over $5.5 million to the IRS, according to his plea agreement.
On Oct. 31, District Judge Gregory H. Woods sentenced Elmaani to four years in prison, followed by one year of supervised release.
He also ordered the defendant to pay $5.5 million in restitution to the IRS.
District Attorney Damian Williams said that Elmaani violated his duty to pay taxes and the trust of investors in his cryptocurrency project.
"Amir Elmaani violated the duty he owed to pay taxes on millions of dollars of cryptocurrency profits, and he also violated the trust of investors in the cryptocurrency he founded," Williams said.
"Elmaani's sentence sends a clear message that those who seek to evade their tax obligations and defraud investors will be held accountable," he added.
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