Highlights:
- Kagel’s Ponzi scheme defrauded investors of at least $15 million through false promises.
- His legal credentials enhanced the scheme’s credibility, deceiving unsuspecting cryptocurrency investors.
- The case underscores the need for stricter regulatory oversight in cryptocurrency markets.
David Kagel, an 86-year-old former attorney from California, was sentenced to five years of probation and ordered to pay nearly $14 million in restitution for his role in a cryptocurrency Ponzi scheme. The sentencing occurred on October 8 in a Las Vegas federal court presided over by Judge Gloria Navarro. Kagel pleaded guilty to conspiracy to commit commodity fraud in May.
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86-year-old to pay $14M after admitting to running crypto Ponzi schemehttps://t.co/FfPlMoIViO
— John Morgan (@johnmorganFL) October 9, 2024
Fraudulent Crypto Scheme Promised High Returns
Prosecutors allege that Kagel and his two accomplices, David Saffron and Vincent Mazzotta, solicited investments in a fraudulent cryptocurrency trading program between December 2017 and June 2022. They promised high returns to lure victims into a scheme that ultimately defrauded investors of millions of dollars.
According to court documents, the trio secured at least $15 million in victim-investor funds for the purported cryptocurrency trading programs, which they claimed used automated bots to generate high profits. Daniel Kagel allegedly used his law firm’s letterhead to create a false sense of legitimacy for the scheme. As a former attorney, he had access to official letterhead that he used to draft promotional letters sent to potential investors.
These letters assured investors they would see returns between 20% and 100% within 30 days. To gain investors’ trust, Kagel falsely claimed he had 1,000 Bitcoins, worth around $11 million, as collateral for their investments. This made the scheme seem legitimate.
David Kagel to Serve Probation in Hospice Due to Health Concerns
Due to his advanced age and declining health, Kagel will serve his probation in hospice care at a senior facility in Las Vegas. As a condition of his probation, authorities require Kagel to wear a monitoring device whenever he leaves the facility.
Kagel’s health condition was a key factor in the judge’s decision to impose probation rather than incarceration. This arrangement allows him to serve his sentence outside of prison as long as he remains under strict monitoring.
Judge Navarro’s ruling reflects the seriousness of Kagel’s offenses, which included abusing his professional status to perpetrate fraud. In 2023, the California Supreme Court suspended Kagel’s law license over claims of financial misconduct. He was accused of misappropriating $25,000 from clients. This suspension was the third disciplinary action against Kagel, whose license was also suspended in 1997 and 2012.
Co-Defendants Await Trial for Role in Crypto Fraud Scheme
Kagel’s co-defendants, David Saffron and Vincent Mazzotta, face separate trials in April 2025. Both have pleaded not guilty to the charges against them. The two allegedly collaborated with Kagel to promote the scheme, which they advertised as a low-risk, high-return investment opportunity utilizing automated trading bots to maximize profits in cryptocurrency markets.
Prosecutors argue that Kagel’s background as a lawyer made the scheme more believable, helping to mislead potential investors. He and his accomplices used their legal status to create a false sense of legitimacy, attracting unsuspecting victims.
David Kagel’s sentencing shows the rising risks of fraudulent cryptocurrency schemes, which often lure victims with promises of high returns and minimal risk. His case serves as a cautionary reminder for investors to exercise due diligence.
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