In Newark federal court March 29, an Essex County woman admitted her role in a securities scheme involving a blockchain technology company that fraudulently induced victims to invest more than $25 million in cash and cryptocurrency.
Edith Pardo, of Bloomfield, pleaded guilty before U.S. District Judge Stanley Chesler to an indictment charging her with one count of conspiring to commit wire fraud, three counts of wire fraud, and one count of securities fraud in connection with a blockchain technology company.
Prosecutors say that through CG Blockchain Inc. and BCT Inc., Pardo and a co-defendant, Boaz Manor, touted a product called ComplianceGuard, which claimed to provide hedge funds with a blockchain-based auditing tool. Manor had been convicted and served a prison sentence in Canada for crimes stemming from his previous role as a hedge fund manager. Prosecutors say that while raising money for these new entities, Pardo helped Manor, who changed his appearance and used different aliases, to hide his true identity and criminal past from investors.
“Pardo acted as the face of the entities and, with Manor, told prospective investors that Pardo was independently wealthy and provided millions of dollars in seed money, when in fact, she was neither wealthy nor an investor,” said the U.S. Attorney’s Office for the District of New Jersey, according to court documents and statements made during the case.
Authorities accused the defendants of misrepresenting the nature of ComplianceGuard by selling a story that a team of well-credentialed executives ran these entities and that multiple hedge funds were paying millions of dollars in fees to use ComplianceGuard.
“In reality, the entities had no real executives, collected no fees, and ComplianceGuard was barely distributed or used,” said prosecutors, according to court documents and statements.
The prosecutors say that in 2017, the duo used many of these misrepresentations to raise over $25 million through an initial coin offering (ICO) for a new product called Blockchain Terminal, which claimed to allow hedge funds and financial institutions to trade and manage cryptocurrency.
“But after investors began to learn about Manor’s true identity and criminal past, Manor admitted to hiding this information to avoid destroying his new companies,” said prosecutors, who added that Manor is currently a fugitive.
When Pardo is sentenced in August, she faces stiff penalties in potential jail time and fines.
The conspiracy and wire fraud counts carry a maximum potential penalty of 20 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. The securities fraud count carries a potential penalty of 20 years in prison and a $5 million fine.d