Federal Court Sentences Magdaleno Mendoza
A federal court has handed down a 71-month prison sentence to Magdaleno Mendoza, a key figure in a fraudulent cryptocurrency Ponzi scheme that specifically targeted working-class individuals in the Spanish-speaking community. Mendoza was instrumental in promoting IcomTech, a so-called cryptocurrency mining and trading company that emerged in 2018 but collapsed by the end of the following year, as reported by the U.S. Attorney’s Office for the Southern District of New York.
Fraudulent Operations of IcomTech
IcomTech’s fraudulent operations falsely claimed to offer guaranteed daily profits through crypto trading and mining activities. Instead, the enterprise functioned similarly to a traditional multi-level marketing (MLM) scheme, utilizing funds from new investors to repay earlier ones, all while promoters like Mendoza misappropriated substantial sums for personal enrichment.
Restitution and Forfeiture
In addition to the prison term, Mendoza was mandated to repay $789,218.94 in restitution and forfeited assets totaling $1.5 million, which included his home in Downey, California, acquired from the proceeds of the scam. Mendoza’s involvement was not isolated, as he had a history of promoting two previous crypto Ponzi schemes and maintained close ties with IcomTech’s founder, David Carmona.
Promotional Tactics and Victim Misleading
Mendoza utilized his Los Angeles-area restaurant to host promotional events, during which he collected large cash sums from attendees. Promoters showcased ostentatious lifestyles, arriving in luxurious vehicles and dressed in high-end fashion, while potential victims were misled into believing in non-existent “profits” displayed on inaccessible dashboards.
Challenges Faced by Investors
As early as August 2018, those looking to withdraw their investments faced numerous challenges, including delays and excessive fees. These complications led IcomTech to introduce a proprietary token dubbed “Icoms,” presented as a means of future payments, which ultimately proved to be worthless, compounding the financial losses for investors.
Concerns in Immigrant Communities
The increasing prevalence of such schemes among immigrant communities has generated concern. According to Ari Redbord, who serves as the global head of policy at TRM Labs and is a former U.S. attorney, the cultural and linguistic ties between promoters and their victims often reduce skepticism and encourage participation. Furthermore, opportunistic fraudsters exploit genuine obstacles that marginalized communities face, including limited access to conventional financial resources and lack of awareness regarding regulatory warnings.
Judicial Responses and Ongoing Challenges
Redbord indicated that Mendoza’s 71-month sentence aligns with judicial responses to extensive fraud within the cryptocurrency realm, underscoring the accountability for deliberate intentions, substantial victim impact, and significant leadership roles within schemes.
The legal outcomes extend beyond Mendoza, as several others involved in the IcomTech operation have been convicted, including Carmona, the alleged CEO Marco Ruiz Ochoa, web developer Gustavo Rodriguez, and other senior promoters like David Brend, Juan Arellano, and Moses Valdez. Redbord pointed out that persistent promoters of such schemes represent an ongoing challenge in the crypto landscape, often shifting from one scam to another and targeting different audiences. The case of IcomTech illustrates that although these fraudulent promoters may temporarily evade consequences, their past endeavors eventually lead to justice being served.
