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Justice News

Department of Justice
U.S. Attorney’s Office
Eastern District of New York

FOR IMMEDIATE RELEASE
Tuesday, March 26, 2019

Staten Island Man Indicted for Defrauding Investors Trading in Virtual Currency

Defendant Solicited Investments on Facebook and Twitter, But Allegedly Stole the Money for Personal Use

A nine-count indictment was unsealed today in federal court in Brooklyn charging  Patrick McDonnell, also known as “Jason Flack,” with wire fraud in connection with a scheme to defraud investors in virtual currency.  McDonnell was arrested earlier today, and is scheduled to be arraigned this afternoon before United States Magistrate Judge Sanket J. Bulsara. 

Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Philip R. Bartlett, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS), announced the charges.

 “As alleged, the defendant defrauded investors by making false promises and sending them fraudulent balance statements, hiding the fact that he was stealing their money for his personal use,” stated United States Attorney Donoghue.  “The defendant’s fraud ends now, he will be held responsible for his criminal conduct.”  Mr. Donoghue expressed his grateful appreciation to the United States Commodity Futures Trading Commission (CFTC) for its significant cooperation and assistance in this case. 

“The defendant, Patrick K. McDonnell, used smoke and mirrors to allegedly dupe investors into paying his company—CabbageTech, for advice and strategies on crypto-currency trading,” stated USPIS Special Agent-in-Charge Bartlett.  “However, Postal Inspectors and their federal law enforcement partners unmasked McDonnell and his scheme to defraud investors, and brought him to justice for his alleged criminal actions.”

As alleged in the indictment, between approximately November 2014 and January 2018, McDonnell portrayed himself as an experienced trader in virtual currency, promising customers he would provide trading advice, and purchase and trade virtual currency on their behalf.  Beginning in approximately May 2016, McDonnell made similar representations through his Staten Island-based company, CabbageTech, Corp., also known as Coin Drop Markets.  However, neither McDonnell nor CabbageTech provided investment services.  Instead, McDonnell sent investors false balance statements purportedly showing that their investments had been profitable, and stole their money for his personal use.  When investors requested refunds, McDonnell initially offered excuses for delays in repayment, and eventually stopped responding at all.   In total, McDonnell defrauded at least 10 victims of at least $194,000 in U.S. currency, 4.41 Bitcoin, 206 Litecoin, 620 Ethereum Classic and 1,342,634 Verge currency.

The charges in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.  If convicted, McDonnell faces a maximum sentence of 20 years’ imprisonment. 

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorney Hiral D. Mehta is in charge of the prosecution. 

The Defendant:

PATRICK MCDONNELL (also known as “Jason Flack”)
Age:  46
Staten Island, New York

E.D.N.Y. Docket No. 19-CR-148 (NGG)

Topic(s): 
Securities, Commodities, & Investment Fraud
Contact: 
John Marzulli Tyler Daniels United States Attorney’s Office (718) 254-6323
Updated March 26, 2019