Man Pleads Guilty To Defrauding Customers Who Bought Cryptocurrency-Mining Computers And Miner Hosting Services

U.S. Attorney's Office

Southern District of New York

FOR IMMEDIATE RELEASE

Tuesday, November 29, 2022

Man Pleads Guilty To Defrauding Customers Who Bought Cryptocurrency-Mining Computers And Miner Hosting Services

Damian Williams, the United States Attorney for the Southern District of New York, announced that CHET STOJANOVICH, a/k/a "Chester J. Stojanovich," pled guilty today to wire fraud for defrauding more than a dozen victims of more than $2 million through fraudulent misrepresentations that he would provide the victims with specialized cryptocurrency-mining computers ("Miners") and Miner hosting services that would provide the victims with a lucrative stream of "hash power" convertible into cryptocurrency. Instead, STOJANOVICH misappropriated his victims' money and failed to provide them with the Miners and Miner hosting services they had purchased from him. STOJANOVICH is scheduled to be sentenced on March 2, 2023, before United States District Judge Denise Cote, who presided over today's guilty plea hearing.

U.S. Attorney Damian Williams said: "Cryptocurrency mining has generated much media attention and public excitement in the past few years, but new forms of money and investment can also generate fresh opportunities for old-fashioned fraud. Chet Stojanovich has pled guilty to using those time-worn fraud techniques on this new financial frontier as he stole millions of dollars from victims who thought they were investing in cryptocurrency mining."

According to publicly filed documents in this case:

From at least 2019 until his arrest in April 2022, STOJANOVICH controlled various companies, including Chet Mining Co. LLC ("Chet Mining"). Starting in or about March 2019, STOJANOVICH engaged in a scheme to defraud people who were seeking to purchase Miners and Miner hosting services through which they expected to obtain "hash power" convertible into cryptocurrency and money. STOJANOVICH defrauded these victims by falsely telling them that he would purchase, and had purchased, Miners on their behalf and that he would provide them with Miner hosting services and had already obtained such Miner hosting services for them.

In total, STOJANOVICH fraudulently induced more than a dozen customer-victims to pay a total of more than $2 million to STOJANOVICH and his companies, ostensibly in return for Miners and Miner hosting services. Despite fraudulent representations to the contrary, STOJANOVICH: (1) failed to provide many of the Miners that he told customers he had acquired; (2) failed to provide the Miner hosting services and cryptocurrency hash power that he represented he would provide; (3) employed deceptive practices to create the illusion that such Miners had been acquired and were being used to provide hash power to those customers; and (4) misappropriated his customers' funds and spent the funds on unrelated and personal expenditures, including chartered air flights, hotel rooms, limousines, and private parties.

Defrauding at Least 10 Victims in 2019

In the spring and early summer of 2019, STOJANOVICH fraudulently induced at least 10 customers to pay a total of more than $2 million to STOJANOVICH and Chet Mining in return for Miners and Miner hosting services. Based on these and other misrepresentations, STOJANOVICH issued at least 15 invoices to these 10 victims with instructions to make payment to STOJANOVICH or one of his companies. As directed by STOJANOVICH, these customers paid STOJANOVICH more than $2 million in bank wires and cryptocurrency transfers. However, STOJANOVICH failed to provide the Miners and Miner hosting services that he had agreed to provide and for which he had been paid.

Defrauding Three More Victims in 2021

In or about August and September 2021, STOJANOVICH induced at least three additional customer-victims to pay him a total of approximately $179,880 as payment for a total of 127 Miners. Ultimately, STOJANOVICH provided those customers with only three of the 127 Miners they had paid for and repaid those customers only approximately $61,000 of the $179,880 they had paid, mostly from funds misappropriated from another customer.

The March 2022 Deposition

Several of the victims of the scheme described in the Indictment brought lawsuits against STOJANOVICH in federal court in Manhattan. In one such lawsuit, Holmes et al. v. Chet Mining, Chet Stojanovich, et ano., Case No. 20 Civ. 4448 (LJL) (S.D.N.Y.), STOJANOVICH was ordered by the court to appear for a deposition on March 4, 2022. During that deposition, STOJANOVICH testified falsely on a number of subjects. For example, in response to several questions, STOJANOVICH testified that he did not know the answers without looking in his personal cellphone and falsely testified that his phone was downstairs in his rental car or in storage. The deposition was thereupon adjourned for a half-hour, and STOJANOVICH was instructed to retrieve his cellphone and return to the deposition. Instead, STOJANOVICH left the deposition and loitered in the vicinity of his car until after everyone else participating in the deposition had left. Shortly thereafter, he returned to Canada, where he resided until he was arrested on April 11, 2022, following his attempt to re-enter the United States.

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STOJANOVICH, 38, previously of New York, New York, but residing in California since his release on bail in this case, pled guilty to one count of wire fraud, which carries a maximum penalty of 20 years in prison.

The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the sentencing judge.

Mr. Williams praised the outstanding work of the Federal Bureau of Investigation in the investigation of this case

This case is being handled by the Office's Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney David Raymond Lewis is in charge of the prosecution.

Contact:

Nicholas Biase (212) 637-2600

Press Release Number:

22-364

Updated November 29, 2022