Former South Florida cryptocurrency exchange operator charged with fraud

A former Palm Beach County man has been charged with 17 counts of fraud related to the theft of more than $1 million in cryptocurrency from a digital exchange he ran nearly a decade ago.

In an indictment unsealed Wednesday, federal prosecutors in Miami accused Paul Vernon, 48, of taking users’ deposits on the now-defunct exchange, Cryptsy, and transferring them to a personal bank account between May 2013 to May 2015. Cryptsy’s computer servers were in Miami.

As part of his scheme, authorities alleged, Vernon solicited new customers even after he disclosed to Cryptsy employees in the summer of 2014 that the exchange had been hacked and that $5 million worth of bitcoins and other cryptocurrencies had been stolen.

”Vernon falsely and fraudulently posted on the Cryptsy blog that Cryptsy strived for transparency and doing what is right,” according to the indictment unsealed in federal court.

“Vernon made this false and fraudulent representation whiles simultaneously failing to disclose the June 2014 hack, his own theft of Cryptsy customers’ funds, and his use of new and existing Cryptsy customers’ funds to conceal his fraudulent conduct.”

Finally, in January 2016, Vernon revealed Crypsty had been hacked but he already had fled to China, prosecutors alleged. Prosecutors don’t know his whereabouts now.

In April 2016, after being notified that Cryptsy was in court-appointed receivership, Vernon hacked into Cryptsy servers, stole the exchange’s database containing customer funds, then destroyed the database, according to the indictment.

The Miami New Times chronicled the saga of Cryptsy and Vernon in a June 2016 feature.

All counts but one against Vernon carry a maximum of 20 years in prison. The charges were initially filed and sealed in 2019. Vernon was declared a fugitive after a warrant for his arrest was filed.

Vernon did not immediately respond Wednesday to an email request for comment. No attorney for Vernon has been listed in court filings.