CYPRESS, Texas (KTRK) – A cryptocurrency executive from Cypress has been indicted for his alleged role in a scheme to defraud investors. Brian Fontenot II, who serves as the Chief Technology Officer of XUSD, is jailed in Galveston County awaiting extradition to Georgia, where he's facing 90 criminal charges related to the operation.
In May, Fontenot and seven others, including XUSD founder James Nelson, were indicted in Baker County, Georgia, following a multi-year FBI investigation that was then handed over to local authorities. Investigators say that during a meeting in Georgia in 2021, representatives for XUSD told prospective investors that XUSD coins were backed with precious mineral mines as well as a Chinese imperial gun box worth $100 trillion. Houston attorney Geoff Berg, who has represented cryptocurrency scam victims in other cases, commented, "Those types of numbers, I'm not even sure Apple's got that kind of money. I'm not sure the planet earth has that kind of money."
Prosecutors say Fontenot and his partners raised more than $3 million in 2021, which they then transferred to themselves and to side ventures. Despite the indictment, XUSD appears to still be in business. In March, the company inked a naming rights deal with Indoor Football League team the Quad City Steamwheelers. Prosecutors point to a YouTube video shot during halftime at a Steamwheelers game during which Fontenot claims XUSD "is the most powerful stable coin in the world and it's stabilized by an asset pool of $414 trillion in physical assets." For reference, that's more than 14 times the size of the entire U.S. economy.
The court documents Eyewitness News reviewed don't specify who invested in the cryptocurrency or whether any are from the Houston area. Berg further noted, "In a case where the flag is as red as a $100 trillion Chinese gun box, what you would expect to see is that victims are elderly, some with impaired mental faculties, people with dementia." The Harris County Precinct 5 Constable's Office executed a search warrant at Fontenot's Cypress home last week, where they searched for evidence linking him to the company. He was arrested in Galveston County the same day and has filed paperwork indicating he won't fight extradition to Georgia.
For news updates, follow Luke Jones on Facebook, X and Instagram.
Source:
ABC13 Houston
Frequently Asked Questions (FAQ)
Cryptocurrency Scams and Investor Protection
Q: What are the typical claims made by fraudulent cryptocurrency schemes?
A: Fraudulent cryptocurrency schemes often make outlandish claims about the backing of their coins, such as being backed by immense wealth in precious minerals or historical artifacts, often with astronomical valuations that far exceed realistic economic figures. They may also promise guaranteed high returns.
Q: What red flags should investors look out for when considering cryptocurrency investments?
A: Investors should be wary of promises of unbelievably high returns, claims of assets backing their cryptocurrency that seem too good to be true (like a $100 trillion gun box), pressure to invest quickly, and a lack of transparency regarding the technology or team behind the project. The involvement of promoters with questionable backgrounds or tactics, such as targeting vulnerable individuals, are also significant red flags.
Q: What actions can authorities take against individuals involved in cryptocurrency fraud?
A: Authorities can pursue criminal charges, including indictments for fraud and other related offenses. This can lead to arrests, extradition, and prosecution, resulting in penalties such as fines and imprisonment. Civil actions can also be taken to recover investor funds.
Q: How can investors protect themselves from cryptocurrency scams?
A: Investors should always conduct thorough due diligence on any cryptocurrency project before investing. This includes researching the team, understanding the technology, verifying claims, and being skeptical of overly optimistic or unrealistic promises. Investing only what one can afford to lose is also a crucial risk management strategy. Consulting with financial advisors or legal professionals experienced in cryptocurrency can also provide valuable guidance.
Crypto Market AI's Take
This case highlights the persistent dangers of inflated claims and outright fraud within the cryptocurrency space. The alleged backing of XUSD coins with assets valued at $100 trillion or $414 trillion is a clear indicator of a potential scam, as such valuations are astronomically beyond any realistic economic measure. At Crypto Market AI, we leverage advanced AI analytics to identify such discrepancies and provide objective market intelligence. Our platform is designed to help investors navigate the complexities of the crypto market by offering data-driven insights, real-time analysis, and identifying projects with genuine utility and sustainable models, steering clear of the hype and unrealistic promises that often characterize fraudulent schemes. For those looking to understand how to navigate these risks, our
AI-driven crypto trading tools can offer a more analytical approach to market participation.
More to Read:
