An 86-year-old former attorney from California has been given a five-year probation sentence and ordered to pay nearly $14 million after confessing to running a Ponzi scheme involving cryptocurrencies. The judgment was delivered on October 8 by Judge Gloria Navarro of the Las Vegas federal court, following David Kagel’s guilty plea to one count of conspiracy to commit commodity fraud in May. Kagel, who is currently receiving hospice care at a senior facility in Las Vegas due to his deteriorating health, will serve his probation there unless he leaves, in which case he will be required to wear a monitoring device.
According to government prosecutors, who filed charges against Kagel last year, he and two accomplices enticed victims to invest in a fraudulent cryptocurrency bot trading scheme between December 2017 and June 2022. They promised high returns and no risk. Prosecutors stated that during this period, the trio fraudulently promoted and solicited investments, managing to obtain approximately $15 million from victim investors for various cryptocurrency trading programs.
Kagel played a role in promoting the crypto scam by drafting letters on his law firm’s letterhead, which were then sent to victims. This use of official letterheads helped establish trust, according to the prosecutors. Victims believed that they were investing in a legitimate scheme that utilized trading bots to engage in cryptocurrency markets.
The fraudulent scheme guaranteed the repayment of the principal investment, as well as profits ranging from 20% to 100% of the principal, within 30 days. Kagel claimed to possess 1,000 Bitcoins (BTC) in a wallet valued at $11 million in January 2018, which were held in escrow to secure the investments. He also falsely claimed to have previous experience in crypto investments in order to build trust.
In 2023, the California Supreme Court revoked Kagel’s law license after he failed to respond to disciplinary charges. It was revealed that he had misappropriated $25,000 in client funds. Prior to this, his law license had been suspended twice, in 1997 and 2012.
Kagel’s alleged accomplices, David Saffron and Vincent Mazzotta, have pleaded not guilty and are awaiting trial in a federal court in Los Angeles, scheduled for next April.