AMIR BRUNO ELMAANI, also known as “Bruno Block” and the founder of the cryptocurrency “Oyster Pearl,” has been sentenced to four years in prison for tax-related offenses. The United States Attorney for the Southern District of New York, Damian Williams, announced this sentencing, which represents the maximum allowable punishment under statute. ELMAANI had previously pleaded guilty to these offenses on April 5, 2023, before U.S. District Judge Colleen McMahon, who presided over today’s sentencing. In his guilty plea, ELMAANI admitted to secretly minting and selling Pearl cryptocurrency tokens for personal gain, leading to a significant drop in the price of Pearl tokens. Additionally, he confessed to not reporting income tax on specific cryptocurrency profits, causing a tax loss exceeding $5.5 million.
U.S. Attorney Damian Williams emphasized the importance of adhering to tax obligations and regulatory compliance within the cryptocurrency markets, underscoring that those who fail to do so will face prosecution.
Here’s an overview of the case:
Cryptocurrency Promotion and Deceptive Actions:
- In September and October 2017, ELMAANI initiated the online promotion of a new cryptocurrency called Pearl tokens. He used the online alias “Bruno Block” and announced plans to develop the Oyster Protocol, an online data-storage platform where users could purchase storage using Pearl tokens.
- ELMAANI operated almost exclusively under the pseudonym “Bruno Block,” concealing his true identity from employees and associates.
Initial Coin Offering (ICO) and Tax Evasion:
- ELMAANI sold Pearl tokens to the investing public through an ICO and various cryptocurrency market platforms, intending to retain a “founder’s share” of Pearl tokens for personal use.
- He owned and controlled Oyster Protocol Inc. through a shell company not linked to his real name.
- In June 2018, ELMAANI claimed to retain millions of Pearl tokens as his “ownership stake” in Oyster Protocol but stated that he had to move the tokens to another cryptocurrency wallet to avoid double taxation. However, he did not report or pay tax on cryptocurrency proceeds and used friends and family as nominees to receive and transfer cryptocurrency proceeds or U.S. currency to his accounts.
- ELMAANI also dealt substantially in precious metals, kept gold bars on his yacht, and used significant amounts of cash for personal expenses.
The “Exit Scheme” and Price Manipulation:
- In late October 2018, ELMAANI used his access to blockchain technology to secretly mint new Pearl tokens for personal use, causing an increase in the total volume of Pearl tokens.
- He subsequently converted the newly minted Pearl tokens into other cryptocurrencies on an online exchange, leading to trading halts and a substantial drop in Pearl token prices.
- Pearl tokens were subsequently delisted from the primary exchange where they were traded.
Confession and Tax Fraud:
- Initially, ELMAANI attempted to conceal his involvement under the pseudonym “Bruno Block.” Still, he later effectively admitted to his actions online.
- In a recorded call with the CEO of Oyster Protocol Inc., ELMAANI mentioned that he had to take additional new Pearl tokens to avoid taxes.
- He filed a false 2017 tax return, misrepresenting his income as approximately $15,000 from a “patent design” business. He did not file any tax returns or report income to the IRS in 2018.
- Despite this, ELMAANI spent over $10 million in 2018 on various expenses, including multiple yachts, a carbon-fiber composite company, home improvements, and two homes.
Sentencing and Restitution:
- In addition to the four-year prison term, ELMAANI, 31, of Martinsburg, West Virginia, was sentenced to one year of supervised release.
- He was ordered to pay restitution in the amount of $5,523,794.
The investigation was conducted by the Internal Revenue Service and the Federal Bureau of Investigation, with assistance from the Securities and Exchange Commission and the Commodity Futures Trading Commission. This case was handled by the Office’s Securities and Commodities Fraud Task Force, with Assistant U.S. Attorneys Margaret Graham and Adam Hobson leading the prosecution.
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