Crypto Scammer Bruce Brise Sentenced To 50 Months

Founders of Crypto ICO Sentenced to Combined 8 Years in Prison for Tax Evasion After Raising $24 Million from Investors.

The owners of a cryptocurrency company have been sentenced to a combined 8 years in federal prison for tax evasion, announced U.S. Attorney for the Northern District of Texas Chad E. Meacham.

Bitqyck founders Bruce Bise, 61, and Samuel Mendez, 65, were charged with tax evasion in August 2021.

Mr. Bise pleaded guilty on Sept. 9, 2021 and was sentenced on March 7, 2022 to 50 months in federal prison;

Mr. Mendez pleaded guilty on October 12, 2021 and was sentenced this afternoon to 50 months in prison. U.S. District Judge Jane J. Boyle ordered the men jointly and severally liable for $1.6 million apiece.

According to plea papers, Mr. Bise and Mr. Mendez admitted that Bitqyck raised approximately $24 million from more than 13,000 investors.

Instead of fulfilling their promises to these investors, the defendants used Bitqyck funds on personal expenses, including casino trips, cars, luxury home furnishings, art, and rent.

“Crypto actors are required to pay their fair share of taxes, just like everyone else,” said U.S. Attorney Chad Meacham.

“Not only did these defendants shirk their tax obligations, they lied to investors and made off with their millions. Anyone else contemplating such a scheme should know that the Justice Department and its law enforcement partners have a sharp eye on the cryptocurrency space, and we will not let criminal behavior slide.”

“These criminals committed this scheme to thoroughly deceive and defraud stakeholders and the taxpaying public by cheating cryptocurrency investors,” said Special Agent in Charge Christopher J. Altemus Jr., Dallas Field Office.

“The IRS-Criminal Investigation Dallas Field Office is proud to be part of the team that is bringing them to justice and will continue to pursue those who unjustly enrich themselves by not paying their taxes.”

In marketing materials, the pair promoted the company’s cryptocurrency, Bitqy, as a way for “those individuals who missed out on Bitcoin” to get rich.

They held their initial coin offering, or ICO, in 2016. (An ICO is a process in which a company attempts to raise capital by selling a new cryptocurrency, which investors may purchase in the hope that the value of the cryptocurrency will increase.)

In an attempt to legitimize Bitqy tokens – and to avoid scrutiny over selling unregistered securities – the company characterized the cryptocurrency as an “earned gift” that rewarded consumers for certain internet purchases.

A white paper posted on the Bitqyck website promised investors that each Bitqy token came with 1/10th of a share of Bitqyck common stock.

Mr. Bise and Mr. Mendez admitted, however, that they never actually distributed shares to token holders nor embedded the shares within the Ethereum Smart Contract. The only shares of common stock Bitqyck issued were to Bise and Mendez, who collectively owned 100% of Bitqyck’s common stock.

About nine months after launching Bitqy, Mr. Bise and Mr. Mendez began marketing another token, BitqyM, arbitrarily priced at $1. They claimed buying the token allowed investors to join “Bitcoin mining operations,” by paying to power a Bitqyck Bitcoin mining facility in Washington state.

In reality, Mr. Bise and Mr. Mendez admitted in plea papers, no such mining facility ever existed. Unbeknownst to investors, the defendants contracted with an overseas third-party company in an attempt to mine the Bitcoin they’d promised to investors.

(Bitcoin mining involves solving complex mathematical problems in order to verify transactions on a public ledger, known as the Blockchain. The problems require computing power, which in turn requires a significant amount of electricity.)

Mr. Bise and Mr. Mendez profited from Bitqyck by diverting income from the company for their personal use at their shareholders’ expense. From 2016 to 2018, Mr. Bise and Mr. Mendez raked in roughly $4.68 million and $4.48 million, respectively.

“By misrepresenting unregistered securities to investors who were lured with the appeal of owning shares of interest in a new and exciting marketplace, the defendants took advantage of unsuspecting individuals and defrauded them out of millions of dollars,” said Ryan L. Korner, Special Agent in Charge of IRS-CI’s Los Angeles Field Office.

“Today’s sentencing saw justice served not only on the investors of cryptocurrency, but also on honest, hard-working American taxpayers who choose to pay their fair share of income taxes, rather than enriching themselves by evading their tax-paying responsibilities as both Mr. Bise and Mr. Mendez have done.”

Taxpayers transacting in virtual currency are required by law to report those transactions on their tax returns. For 2016 and 2017, Mr. Bise underreported his income to the IRS, resulting in a tax loss of $371,278. For that same period, Mr. Mendez also underreported his income to the IRS, resulting in a tax loss of $311,155.

In 2018, Bitqyck failed to file any corporate tax returns at all despite netting more than $3.5 million from investors. The total tax loss joint and severally to the United States government between Mr. Bise and Mr. Mendez is more than $1.6 million dollars.

The defendants’ guilty pleas came on the heels of a civil settlement with the Securities & Exchange Commission (SEC), in which Bitqyck agreed to pay an $8.3 million penalty to resolve claims that it defrauded investors and operated an unregistered digital asset exchange.

As part of that settlement, Mr. Bise and Mr. Mendez agreed to pay disgorgement and penalties of $890,254 and $850,022, respectively.

The Internal Revenue Services’ Criminal Investigations Divisions in Dallas and Los Angeles conducted the investigation. Assistant U.S. Attorney Sid Mody is prosecuting the case.

According to an USA Department of Justice release

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