The two founders of a cryptocurrency company have been sentenced in Dallas to more than four years in prison each after admitting to a federal tax-evasion charge.
Additionally, U.S. District Judge Jane J. Boyle ruled that the two, Bruce Bise, 61, and Samuel Mendez, 65, are jointly and severally liable for $1.6 million that each owes in unpaid income taxes.
According to court records, Bise and Mendez underreported to the Internal Revenue Service their income for 2016 and 2017 and their company, Bitqyck, failed to file corporate tax returns for 2018.
Bise pleaded guilty last September and was sentenced March 7 to 50 months in federal prison. Mendez pleaded guilty last October and was likewise sentenced Thursday to 50 months in prison.
According to court documents filed in connection with their guilty pleas, Bise and Mendez, who owned 100 percent of Bitqyck’s common stock, acknowledged misappropriating funds from the roughly $24 million the company raised from more than 13,000 investors. Instead of using the money as they said the company would, the documents say, Bise and Mendez used the invested cash for personal expenses, including casino trips, cars, luxury home furnishings and art.
“Crypto actors are required to pay their fair share of taxes, just like everyone else,” said Chad Meacham, acting U.S. attorney for the Northern District of Texas.
“Not only did these defendants shirk their tax obligations, they lied to investors and made off with their millions. Anyone else contemplating such a scheme should know that the Justice Department and its law enforcement partners have a sharp eye on the cryptocurrency space, and we will not let criminal behavior slide.”
Christopher J. Altemus Jr., special agent in charge of the Dallas field office for IRS criminal investigations, added: “These criminals committed this scheme to thoroughly deceive and defraud stakeholders and the taxpaying public by cheating cryptocurrency investors.”
In marketing materials, Bitqyck promoted its cryptocurrency, Bitqy, as a means for “those individuals who missed out on Bitcoin” to get rich. Bitqyck’s website promised investors that each Bitqy token came with a tenth of a share of Bitqyck common stock. But Bise and Mendez admitted to authorities they never distributed any shares to token holders.
The guilty pleas follow a civil settlement with the U.S. Securities and Exchange Commission in which Bitqyck agreed to pay $8.3 million to resolve claims that it defrauded investors and operated an unregistered digital-asset exchange. Under that settlement, Bise agreed to pay $890,254 and Mendez agreed to pay $850,022.
According to court records, Bise is represented by Paul Taliaferro Lund of Burleson Pate & Gibson in Dallas, Mendez by William Hermesmeyer of Southlake. The lead prosecutor in the case is Sid Mody, an assistant U.S. attorney for the Northern District of Texas.