Chief Technology Officer of Blockchain Company Charged with Scheme to Defraud Company of Over $1 Million and Cryptocurrency | USAO-SDNY

Damian Williams, United States Attorney for the Southern District of New York and Michael J. Driscoll, Assistant Director of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the conclusion of an indictment today. charging RIKESH THAPA with operating a scheme to defraud a technology start-up company (“Victim Company”) of over $1 million in US currency, cryptocurrency and utility tokens. THAPA used the proceeds of his crime on personal expenses, including nightclubs, travel and clothing, and falsified records and deleted evidence to conceal his theft. RIKESH THAPA was arrested earlier today in the Southern District of California. The defendant is expected to be arraigned before U.S. Magistrate Judge Mitchell D. Dembin this afternoon. The case has been assigned to U.S. District Judge John P. Cronan.

US Attorney Damian Williams said: “Rikesh Thapa allegedly betrayed the company’s trust as he was responsible for securing significant amounts of money. Thapa went to great lengths to cover up his fraud, but thanks to the dedicated work of this office and our law enforcement partners, he will now have to answer for his crimes.”

FBI Assistant Director-in-Charge Michael J. Driscoll said: “As we allege today, the defendant repeatedly stole from and defrauded the victim company – which he co-founded – to finance a luxurious personal lifestyle. In an attempt to hide his crimes, he also erased and falsified records. The FBI will continue to work to ensure that individuals willing to defraud and steal from private businesses are held accountable in the criminal justice system.”

As alleged in the indictment unsealed today in Manhattan federal court:[1]

RIKESH THAPA co-founded and was the Chief Technology Officer (“CTO”) of Victim Company, which during the relevant period was involved in the use of blockchain and other technology to provide a ticketing platform for live events. Between December 2017 and September 2019, THAPA used his position to carry out a scheme to defraud the victim company.

In 2018, Victim Company sought to diversify its banking operations due to its understanding that certain financial institutions were reluctant to maintain relationships with companies, such as Victim Company, involved in cryptocurrency transactions. In furtherance of these efforts, THAPA agreed to receive and hold $1 million of the victim company’s money in his personal bank account (the “THAPA Account”) while the victim company explored banking options. However, soon after receiving the $1 million, THAPA began using the funds for personal expenses. Nevertheless, THAPA repeatedly acknowledged what was intended to be the temporary nature of his possession of the funds, representing to a colleague, in substance and in part, that the money was “a stationary 1 mil in my account” held “for safe keeping.” THAPA then falsified records to conceal his theft, and provided the victim company with a falsified bank statement, falsely representing that THAPA had over $21 million, approximately $1 million of which was held in a specific savings account (“the purported account”). THAPA did not actually have the alleged account and had much less than $21 million in the bank in question. In 2019, THAPA refused to return $1 million, which he spent on nightclubs, travel and clothing, among other things.

In addition, between December 2017 and September 2019, THAPA used its control over Victim Company’s cryptocurrency holdings to embezzle at least 10 Bitcoin from Victim Company. For example, in August 2018, THAPA diverted at least one of the victim company’s Bitcoins for its own benefit, selling the Bitcoins for approximately $6,500 and depositing the proceeds into the THAPA account (“August 2018 Bitcoin Transaction”). To avoid detection, THAPA falsified trading records and deleted emails. In July 2019, THAPA sent the victim company’s CEO a fraudulent transaction report that misrepresented the August 2018 Bitcoin transaction. After the CEO copied THAPA, then requested and received a transaction report directly from the victim company’s cryptocurrency brokerage, THAPA disabled the CEO’s email account at the victim company (the “CEO Email Account”), deleted the cryptocurrency brokerage’s email from the CEO’s email account, and then deleted the entire CEO email account.

In yet another facet of the scheme, THAPA stole the victim company’s utility symbols. Such tokens are a type of cryptocurrency that can be used to access certain services, products or features. In July 2019, unbeknownst to Victim Company’s CEO, THAPA arranged a meeting in Italy between THAPA and individuals who claimed to be interested in purchasing Victim Company’s utility chip. Before the meeting, THAPA provided account information for the THAPA account so that the alleged investors could transfer funds to him. However, during the meeting, THAPA agreed to receive cash in exchange for utility tokens. After the meeting, THAPA transferred, without authorization, approximately 174,285 of the victim’s utility tokens to the alleged investors. THAPA later determined that the cash he had received from the alleged investors was fake.

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RIKESH THAPA, 28, of San Diego, California, is charged with one count of wire fraud, which carries a maximum penalty of 20 years in prison.

The statutory maximum sentence is prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Williams praised the outstanding investigative work of the FBI’s New York Field Office.

The prosecution in this case is being handled by the office’s complex fraud and cybercrime unit. Assistant US Attorney Timothy V. Capozzi is in charge of the prosecution.

The charge in the indictment is only an accusation, and the defendant is presumed to be innocent unless and until the contrary is proven.