Utahn accused of defrauding Bitcoin mining clients and illegally transferring money to clients

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A Spanish Fork man is accused in new federal charges of defrauding customers of his cryptocurrency business and mismanaging customer money. (Scott G Winterton, Deseret News)

Estimated reading time: 3-4 minutes

SALT LAKE CITY – A Utah man has been charged with fraud while running a cryptocurrency business and mishandling his clients’ money.

James Wolfgramm, of Spanish Fork, was indicted in U.S. District Court in Utah on January 6 with four counts of wire fraud.

Wolfgramm owned and operated Bitex, a Utah-based company that bought and sold machines that “mine” for cryptocurrencies. Cryptocurrency mining requires sophisticated machines that allow a user to “mine”, which is how new units of cryptocurrency are created. Mining equipment also needs large amounts of electricity to operate.

Federal prosecutors allege that in May 2018, a Bitex client purchased three high-end mining machines – as opposed to lower-cost mining equipment – from Wolfgramm for more than $ 674,000, including around $ 43,000 for tax of sales, according to the invoicing documents. However, investigators say the customer instead received lower-cost machines and never had the high-end equipment. The charges also allege that the sales tax included in the purchase price was not paid to the state government.

In May 2019, Wolfgramm reportedly received $ 306,000 from a customer for the purpose of purchasing Bitcoin, with $ 6,000 of that total paid as a commission to Wolfgramm. He allegedly told the client that the Bitcoin was purchased on May 14, 2019. On the same day, Wolfgramm told the client that the trade deal had “no risk or liability” and that the deal had already given rise to returns, according to invoicing documents.

Wolfgramm also reportedly told the client that he could make a return on Bitcoin if the client allowed him to hold Bitcoin on a trading platform that Wolfgramm could access. The client then requested the Bitcoin, but Wolfgramm did not provide it and “furthermore did not provide any documentation indicating that he actually used (the client’s) funds to purchase Bitcoin as promised,” the charges say. .

Prosecutors later said Wolfgramm formed a company named Ohana Capital Financial, which would be a private investment firm offering loans and taking deposits to clients.

Ohana’s motto was “banking the unbankable”. Ohana was registered as a private lender with the Utah Department of Financial Institutions, but was never registered as a full-fledged financial institution, according to billing documents.

Despite the lack of accreditation, Ohana still received money from her clients. However, prosecutors allege that after Ohana received the clients ‘deposits, Wolfgram used funds for unrelated business expenses without the clients’ knowledge.

A customer transferred more than $ 4.9 million to an Ohana account in September 2020, which was to be held for a future transaction with a Chinese manufacturer to purchase personal protective equipment, or PPE. However, instead of keeping the funds for the future transfer, Wolfgramm used more than $ 4 million to pay two separate entities to “settle legal actions against Wolfgramm and Ohana Capital Financial”, according to the charges.

In November 2020, a film company sent $ 1 million to an Ohana account with the intention of later sending the funds to pay for a film project it was trying to fundraise for. Instead of holding the money, prosecutors allege Wolfgramm used the seven-figure deposit to pay for part of the previous client’s PPE transaction.

Additional federal court records show that in February 2021, a judgment was issued against Bitex and Wolfgramm that demanded a payment of more than $ 7.4 million to a UAE-based consulting company.

If convicted of wire fraud charges, Wolfgramm could face a maximum jail term of 20 years. His initial appearance in federal court is scheduled for January 20.

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