David Gilbert Saffron was initially indicted back in June 2022. He was charged with wire fraud, related to operation of the Circle Society Ponzi scheme.

Saffron’s arrest did pop up on my radar but, as far as I could tell, Circle Society wasn’t MLM so BehindMLM didn’t cover it.

A new sealed superseding indictment, filed on December 7th, ties Saffron, Vincent Mazzotta and David Kagel to a broader Ponzi scheme.

This wider scam, pegged at over $25 million in consumer losses, encompasses Circle Society, BitCoin Wealth Management, Omicron Trust, Cloud9Capital and Mind Capital.

I’m not familiar with any of those except Mind Capital, an MLM Ponzi scheme that collapsed in August 2021.

David Gilbert Saffron (right) is an Australian national and former resident of California. Saffron goes by David Gilbert, Dave Gabe, Bitcoin Yoda and The Blue Wizard.

Saffron was arrested on July 7th, 2022. He was released on a $100,000 appearance bond on July 29th.

Vincent Anthony Mazzotta Jr. is a US national and California resident. Mazzotta goes by Vincent Midnight, Anthony, Delta Prime and Director Vinchenzo.

Mazzotta is also the founder and CEO of Runway, encompassing Runway magazine and Runway TV.

Mazzotta (right) was arrested sometime after December 7th. His arraignment was held on December 11th, at which he pled not guilty to all charges.

David Lee Kagel is a former Californian attorney of fifty plus years. Unfortunately Kagel doesn’t have any dorky aliases.

If you want something to laugh at though, Kagel held himself out to be an attorney specializing in securities law.

Kagel was disbarred for “misappropriating client funds” in March 2023. He pled guilty to one count of conspiracy to defraud on June 28th, 2023.

If I had to guess, cooperation through Kagel’s plea deal likely led to Saffron’s and Mazzotta’s superseding indictment.

Saffron’s and Mazzotta’s superseding indictment was unsealed on December 11th.

The indictment details crypto related fraud beginning “in or around December 2017”.

Central to each of Saffron’s and Mazzotta’s Ponzi schemes was a fictional AI trading bot.

SAFFRON held himself out as an expert computer programmer, an expert trader in various cryptocurrencies, and the developer of an artificial-intelligence (“AI”) cryptocurrency trading robot or “AI Bot.”

SAFFRON solicited prospective investors (hereinafter, “victim-investors”) to entrust their fiat currency or cryptocurrency (collectively, “funds”) to defendant SAFFRON for defendant SAFFRON to trade on the victim-investors’ behalf.

Again, while I can’t speak to Circle Society, BitCoin Wealth Management, Omicron Trust or Cloud9Capital, Mind Capital’s ruse was indeed an AI trading bot.

This is from Mining Capital’s now defunct website, circa 2020;

From your control panel at any time you can see in real-time how our Artificial Intelligence algorithms work finding investment opportunities and the profitability obtained in each operation performed.

Instead of fronting Mind Capital themselves, Saffron and Mazzotta hid behind Gonzalo Garcia-Pelayo – some old geezer they dug up in Spain.

To get people to invest in their various Ponzi schemes,

SAFFRON and his co-conspirators hosted extravagant parties for prospective victim-investors at luxury homes in the Hollywood Hills, which defendant SAFFRON did not actually own but only rented for the parties; hosted potential victim-investors in Las Vegas casino hotel suites; chartered flights on private jets; and traveled with a team of professional security guards.

SAFFRON made numerous false representations and promises to victim-investors to induce them to invest funds in the investment fraud scheme, including that defendant SAFFRON:

(1) was a computer programmer who was the lead developer for the Uber App and Snapchat App;

(2) wrote the security software used by most U.S. banks;

(3) had perfected the programing of his AI Bot to execute profitable trades approximately 76 percent of the time;

(4) had a series-7 securities broker’s license; and

(5) had put at least 1,000 Bitcoin (approximately $11 million) in co-conspirator Kagel’s attorney escrow account to guarantee investors’ principal investment against any risk of loss.

Through the various fictional trading bots,

SAFFRON and his co-conspirators falsely represented and promised victim-investors that their invested funds would return short-term, high-yield profits, and guaranteed victim investors’ principal investment against the risk of loss.

SAFFRON performed fake demonstrations of his AI Bot to deceive potential victim-investors and falsely assure them of its successful and profitable trading capacity.

SAFFRON accepted a small “test” cryptocurrency investment and then, a short time later, provided a high-yield return on the small investment to the victim-investor. Defendant SAFFRON falsely represented that the AI Bot had successfully executed numerous trades that generated the high-yield returns.

The deceptive demonstration induced victim investors to invest large amounts of funds.

In reality however;

SAFFRON did not employ an AI Bot to trade the victim investors’ “test” cryptocurrency investments.

Instead, defendant SAFFRON used other investors’ funds to pay the new investors (i.e., Ponzi payments) and falsely represented that the profits were generated by the AI Bot.

SAFFRON and his co-conspirators were operating an illegal investment fraud scheme, and defendant SAFFRON and his co-conspirators misappropriated victim-investors’ funds for their own personal benefit.

SAFFRON and MAZZOTTA, together with other co-conspirators, misappropriated victim-investors’ funds to pay for personal expenses including repayment of debt, private chartered jet flights, luxury hotel accommodations, luxury mansion rentals, a personal chef, gourmet catering services, and a detail of professional security guards.

Mind Capital collapsed through a shitcoin exit-scam. Other typical Ponzi exit-scam ruses are detailed in the superseding indictment.

When victim-investors demanded the return of their initial investment and the profits that defendant SAFFRON had promised, defendant SAFFRON made various false representations about the reason he could not repay victim-investors until some later time, including, but not limited to:

i. A cryptocurrency exchange that purportedly held all of the victim-investors’ funds had “frozen” defendant SAFFRON’s accounts;

ii. Defendant SAFFRON’s lawyers were continuing to negotiate with the cryptocurrency exchange or government agencies to unfreeze defendant SAFFRON’s accounts;

iii. Defendant SAFFRON’s lawyers refused to release funds from an escrow account purportedly holding approximately 1,000 Bitcoin that was intended to repay investors;

iv. A cryptocurrency exchange was taking days or weeks to complete defendant SAFFRON’s large withdrawal of cryptocurrency;

v. A cryptocurrency exchange would not release funds to defendant SAFFRON until every person that had invested with defendant SAFFRON completed the exchange’s know-your-customer (“KYC”) documentation;

vi. The CFTC’s lawsuit against defendant SAFFRON for cryptocurrency fraud prevented defendant SAFFRON from returning funds to victim-investors; and

vii. Technical problems with the blockchain, the Circle Society Website, and other technology issues had unexpectedly delayed defendant SAFFRON’s ability to make timely payments to victim-investors.

The CFTC secured a $32 million default judgment against Saffron in April 2021. The CFTC’s civil case pertained to Circle Society, which as previously discussed in and of itself wasn’t MLM.

If stealing money through Ponzi schemes wasn’t bad enough, Saffron and Mazzotta double-dipped victims through a recovery scam.

This began with the use that Cloud9Capital, a company set up by Saffron created, had

stolen both the victim-investors’ funds and defendant SAFFRON’s personal funds.

Next Saffron and Mozzotta created Federal Crypto Reserve, a

website that purported to assist victims of cryptocurrency fraud to investigate and recover losses.

SAFFRON and MAZZOTTA took steps to conceal their identities and control of the Federal Crypto Reserve, including paying for proxy-server anonymization services for the Federal Crypto Reserve Website.

To hide their true identities when communicating with victim-investors, defendants SAFFRON and MAZZOTTA created Federal Crypto Reserve email addresses and used unlisted telephone numbers.

After these two entities were set up,

SAFFRON falsely represented to victim investors that defendant SAFFRON had paid the membership fee at the Federal Crypto Reserve to investigate Cloud9Capital and other investment schemes to recover defendant SAFFRON’s purported losses to Cloud9Capital.

SAFFRON and MAZZOTTA solicited victim investors to pay the Federal Crypto Reserve membership fee and falsely represented that the Federal Crypto Reserve could investigate and assist in recovering the victim-investors’ losses.

To deter victim-investors from contacting law enforcement, defendants SAFFRON and MAZZOTTA falsely represented that victim-investors would be more likely to recover cryptocurrency losses through the Federal Crypto Reserve than by hiring a personal lawyer or contacting government authorities.

MAZZOTTA made false representations and promises to victim-investors that the Federal Crypto Reserve was actively investigating fraud claims and had filed complaints with the FBI and Interpol on behalf of the victim-investors.

The superseding indictment sums up Saffron’s and Mazzotta’s criminal conduct across twelve counts of conspiracy to commit wire fraud, wire fraud, conspiracy to obstruct justice, conspiracy to commit money laundering, and money laundering.

The DOJ is seeking forfeiture of ill-gotten gains. If convicted, Saffron and Mazzotta are facing 10 to 20 years in prison for each count (i.e. a 100+ year sentence).

David Kagel is scheduled to plead guilty on January 8th, after which he’ll be sentenced at some point.

 

Update 9th January 2024 – David Saffron was arraigned on December 18th and pled not guilty to all charges in the superseding indictment.

A jury trial has been scheduled for August 13th, 2024.

On January 4th, David Kagel’s January 8th plea hearing was continued to February 5th.

 

Update 16th February 2024 – On Feburary 6th Mazzotta was released pending trial on a $50,000 bond.

There’s also a February 13th sealed order which is a bit strange (no idea what it pertains to).