DOJ Indicts DeFi Protocol Founders on Wire Fraud Charges
Federal prosecutors say the founders diverted user funds while publicly claiming the protocol was solvent and audited.
The Department of Justice on Tuesday unsealed a seven-count indictment against the two founders of a decentralized finance lending protocol, charging them with wire fraud, conspiracy, and money laundering in connection with what prosecutors described as a "calculated scheme" to defraud users of more than $340 million.\n\nProsecutors allege the defendants represented to users that smart contracts had been independently audited and that user deposits were held in over-collateralized lending positions. In reality, according to the indictment, a substantial portion of deposited assets was routed through wallets controlled by the founders and used to purchase real estate, luxury vehicles, and political contributions.\n\nIf convicted on all counts, the defendants face statutory maximums of 20 years per wire fraud count. Both were arrested at their respective residences and made initial appearances before a federal magistrate later that day.
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