Since 2016, Bise and Mendez billed Bitqyck, a Dallas-based cryptocurrency company, as a way for “those individuals who missed out on bitcoin” to still get rich, according to marketing materials.
Investors were hooked. The pair promised that Bitqy, the name for the cryptocurrency their company traded, came with a one-tenth share in the company’s stock.
Bise and Mendez instead used those funds to buy cars, luxury homes and high-end art. The two retained 100% of the company’s stock.
In just two years after their fraudulent initial public stock offering in 2016, Bise and Mendez collected roughly $9.4 million in shareholder investments, which they used to fund their lush lifestyles.
The duo’s grift didn’t stop with Bitqy.
After launching Bitqy in 2016, Bise and Mendez launched another token called BitqyM, for $1 per unit. They told investors that by purchasing BitqyM tokens, they were joining a cryptocurrency mutual group: A bitcoin facility in Washington state focused on buying and selling the cryptocurrency at supposedly optimal moments according to its fluctuating market value would yield massive profits for the investors in Bitqy M, Bise and Mendez’s marketing materials promised.
But the facility was a fiction, Mendez and Bise admitted in plea papers. Instead of pouring investors’ money into financing the facility they promised, Mendez and Bise funneled it into an overseas third-party company to mine Bitcoin for themselves.
The two pleaded guilty to tax evasion in federal court. They each face up to five years in federal prison.
"Because digital investment assets represent a new and exciting technology, they can be very alluring, especially if investors believe they are getting in on the ground floor and will own part of the operations." - David Peavler, SEC
Mendez and Bise’s guilty pleas in criminal court this week come more than two years after the SEC reached an $8.3 million settlement in civil court.
"Because digital investment assets represent a new and exciting technology, they can be very alluring, especially if investors believe they are getting in on the ground floor and will own part of the operations,” said David Peavler, director of the SEC’s Fort Worth Regional Office, who helped investigate the civil case against Mendez and Bise.
“We allege that the defendants took advantage of investors’ appetite for these investments and fraudulently raised millions of dollars by lying about their business," Peavler added.
“Mr. Bise and Mr. Mendez exploited the growing appeal of digital currency and defrauded thousands of victim-investors out of millions of dollars that they used to pay their personal expenses, rent, gambling activities, and purchases of vehicles and art,” said Ryan L. Korner, special agent in charge of the IRS -Criminal Investigation unit's Los Angeles office.
Cryptocurrency fraud has exploded in the past few years. The Federal Trade Commission received nearly 7,000 complaints of crypto scams between October 2020 and March this year. The year before, the FTC received only 570.
“As digital currencies continue to emerge as an investment option for taxpayers, we must continue to increase the pressure on anyone who tries to take advantage of their investors and taxpayers through fraud and tax evasion," said Christopher J. Altemus Jr., special agent in charge of IRS-CI's Dallas office.