Canadian Man Charged in $42 Million Crypto Fraud Scheme Targeting Discord Users

Summary:
A Canadian citizen, Nathan Gauvin, has been charged for orchestrating a $42 million cryptocurrency fraud scheme, targeting investors through Discord. The U.S. government alleges that Gauvin misled investors about the performance of his investment firm, Gray Digital Capital Management Inc., and committed multiple acts of fraud over more than two years.

Key Takeaways

Nathan Gauvin, 26, faces charges for a $42 million cryptocurrency fraud scheme.
Investors were lured on Discord to invest in Gray Digital Capital Management Inc.
Gauvin misused funds for personal expenses and to pay previous investors.
The SEC is pursuing civil penalties, including recovery of wrongfully obtained funds.
Investors are encouraged to verify credentials of investment offerings, especially on social media.

Crypto fraud

Fraud Scheme Targeting Investors on Discord

U.S. Federal prosecutors have charged a 26-year-old Canadian man linked to a massive $42 million fraud scheme, reportedly aimed at enticing people to invest in cryptocurrency and traditional finance markets. Nathan Gauvin allegedly used the social media platform Discord to attract investors, directing them to contribute funds to his company, Gray Digital Capital Management Inc., and its investment products.

As revealed in an indictment from the U.S. District Court for the Eastern District of New York, Gauvin deceitfully acquired $800,000 in credit by providing misleading information to a financial technology firm. This money was later misappropriated for personal expenses, including fees for a private club in London.

“In total, Gauvin fraudulently raised more than $42 million from Gray Digital investors and obtained more than $800,000 in credit from lenders,” stated an announcement from the Securities and Exchange Commission (SEC).

Prosecutors indicate that much of the raised money was used to pay prior investors, indulge in luxury purchases, and cover credit card bills. Jaime Marinaro, the Associate Director of the SEC’s Fort Worth Regional Office, remarked, “Gauvin exploited the trust of his online followers to perpetrate a brazen fraud.”

Authorities apprehended Gauvin in England under a provisional arrest warrant. The SEC has also initiated securities fraud charges against him, highlighting that he continued submitting false documentation during investigations.

Additionally, the Federal Bureau of Investigation (FBI) released a statement seeking to identify potential victims affected by this fraudulent scheme. They noted that these victims may be eligible for specific services and restitution rights under federal and state law.

Ongoing Crypto Fraud for Over Two Years

The indictment details that from May 2022 to October 2024, Gauvin and his associates actively solicited investors to contribute funds to Gray Digital and Gray Fund. Among these ventures, they asserted that the primary fund provided a hybrid strategy combining traditional finance (TradFi) and decentralized finance (DeFi).

Gauvin is accused of significantly misrepresenting the performance of Gray Digital by presenting falsified performance documents to potential investors. He portrayed the Gray Fund as generating double-digit monthly returns and boasting assets exceeding $78 million. In reality, however, the fund reportedly achieved only a compounded monthly return of around 1.4%, with actual assets being much lower than claimed.

A subsequent scheme initiated in May 2024 featured a "seed stock" offering for Gray Digital at $30,000 per share, with Gauvin falsely asserting that the company had a valuation of $60 million and annual revenues surpassing $12 million.

The SEC is pursuing the recovery of ill-gotten gains, alongside prejudgment interest, civil penalties, and conduct-based injunctions against Nathan Gauvin. SEC's Marinaro advised, “Investors should always verify the credentials of anyone offering investment opportunities, especially when those opportunities are promoted through social media or online communities.”