A federal jury in Las Vegas has convicted Brent C. Kovar over a $24 million crypto Ponzi scheme. The owner of Profit Connect was found guilty of defrauding at least 400 investors with claims of a crypto mining operation running on an empty supercomputer.
Kovar ran the company from late 2017 to mid-2021, relying heavily on a narrative of cutting-edge technology. He claimed his firm utilized advanced artificial intelligence (AI) software embedded in a supercomputer to mine cryptocurrencies and verify cross-network transactions.
The pitch to prospective victims was designed to be lucrative: investors were promised fixed annual returns of 15% to 30%, along with a full money-back guarantee. To ease doubts, Kovar claimed Profit Connect was backed by hundreds of millions of dollars in crypto reserves, and that investor funds were insured by the FDIC.
No Actual Crypto Trading
The state insurance claim triggered a joint investigation involving the FDIC Office of Inspector General, the FBI, and IRS Criminal Investigation. The trial revealed a starkly different reality: Profit Connect was consistently losing money, held no asset reserves whatsoever, and was clearly unable to pay the promised returns.
Out of all the money raised, not a single cent went toward genuine crypto trading or mining activities. Over 90% of the company’s revenue came purely from deposits by new victims.
Instead, the funds were used for purposes far removed from crypto. Kovar bought a private residence, covered office operations, and purchased various gifts for his employees. The remaining funds were then recycled to pay returns to earlier investors, exactly like a classic Ponzi scheme.
A Long History of Market Manipulation
The scheme came to a halt nearly five years ago. In July 2021, the SEC stepped in with an asset freeze order that shut down Profit Connect’s operations. The SEC’s initial estimates placed the damages at 277 victims and $12 million in losses - a figure that doubled in prosecutors’ trial evidence today.
The case adds to Kovar’s lengthy history of fraud. In 2009, the SEC sued him over his involvement in Skyway Global, a pump-and-dump market manipulation scheme that coincidentally also cost investors $12 million.
The nine-day trial resulted in a guilty verdict on 11 counts of wire fraud, two counts of mail fraud, and two counts of money laundering. Facing a cumulative maximum sentence of 280 years in prison, Kovar is now scheduled for sentencing on November 30.
Reported by Decrypt.
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
