The Securities and Exchange Commission (SEC) has taken legal action against former New Jersey State Correctional Police Officer, John A. DeSalvo, for his alleged involvement in fraudulent activities related to the Blazar Token, a crypto asset security he introduced, which subsequently collapsed in May 2022. The SEC’s charges also encompass allegations of misappropriation of investor funds, a portion of which DeSalvo allegedly directed towards his personal crypto asset wallets and even utilized for a bathroom renovation.
The SEC’s complaint outlines that DeSalvo managed to amass around $620,000 from roughly 220 investors, spanning the period from the Blazar Token’s inception in November 2021 to its eventual downfall. The complaint further asserts that DeSalvo propagated false information to potential investors, claiming that the Blazar Token was endorsed by the SEC, would replace existing state pension systems, and could be purchased through automatic payroll deduction. He also falsely guaranteed substantial returns to investors. Ultimately, DeSalvo is accused of both misappropriating and misusing the gathered investor funds. Notably, the complaint highlights that DeSalvo’s fraudulent schemes were directed towards law enforcement and first responders.
The SEC’s complaint additionally alleges a prior fraudulent endeavor by DeSalvo, initiated in late January 2021. Through this scheme, he supposedly lured investors, primarily through social media platforms, to invest in a venture involving stocks, options, and crypto asset securities. Allegedly, DeSalvo misused the raised $95,000, losing a significant portion in speculative investments and falsely attributing the losses to unfavorable market conditions.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated, “DeSalvo orchestrated several fraudulent investment schemes that targeted law enforcement personnel and promised astronomical returns.” Grewal emphasized that DeSalvo betrayed the trust of fellow law enforcement individuals, and the SEC aims to hold him accountable for his actions.
David Hirsch, Chief of the Crypto Assets and Cyber Unit in the SEC’s Division of Enforcement, pointed out that this case illustrates a form of affinity fraud that exploits the trust and sense of community among retail investors. Hirsch stressed the importance of registering securities to enhance oversight and investor disclosures, signaling the SEC’s commitment to pursuing those who disregard securities laws.
The filed complaint, lodged in the U.S. District Court for the District of New Jersey, charges DeSalvo with violating antifraud and offering registration provisions within securities laws. The SEC is seeking injunctive relief, disgorgement along with prejudgment interest, and civil penalties.
Concurrently, the U.S. Attorney’s Office for the District of New Jersey has also announced criminal charges against DeSalvo.