A Texas federal judge has issued bench warrants for the arrest of a former Washington state senator and his partner after failing to appear for a hearing. The two men, David Schmidt and Robert Dunlap, have been involved in a purported cryptocurrency scam dubbed Meta 1 Coin.
The SEC Charges A Crypto Scam
On March 20th this year, the Securities and Exchange Commission (SEC) announced that it had obtained an asset freeze and other emergency relief to halt an ongoing securities fraud. Robert Dunlap and Nicole Bowdler established the project in 2018. Later that year, David Schmidt, an ex-Washington state senator, joined the pair as a “board” member.
The Commission alleged the trio for working together to market and sell a purported cryptocurrency scam called Meta 1 Coin. The complaint argued that the defendants made numerous false and misleading statements to potential and actual investors.
For instance, they claimed that the Meta 1 Coin was backed by a $1 billion art collection or $2 billion of gold holdings. The trio also marketed to investors that the Meta 1 Coin was risk-free, would never lose value, and can provide returns up to 225%.
According to the complaint, however, the defendants never distributed the Meta 1 Coins. Instead, they used investor funds to pay personal expenses and funnel proceeds to other parties. It added that the trio raised more than $4,3 million from over 150 investors in and outside the U.S.
Arrest Warrants For Crypto Scammers
Earlier this week, U.S. District Judge Robert Pitman held a hearing on the emergency motion filed by the SEC. The agency wanted all three defendants to stop marketing and raising money for the alleged fraudulent project – Meta 1 Coin. However, Schmidt and Dunlap didn’t appear despite the proceeding taking place by video conference and telephone due to the COVID-19 pandemic.
Therefore, the judge ordered the arrests of the ex-legislator David Schmidt and Robert Dunlap. Judge Pitman supported his decision by saying that “if incarcerated, Dunlap and Schmidt will be unable to continue Meta 1’s operations, create marketing videos, or email their putative investors.”
He also added that fines would not be as effective:
“They have obtained millions of dollars in revenue from putative investors, so they are likely able to pay a reasonable fine. But they cannot, in the wake of the court’s asset freeze order. As a result, a fine would, curiously, neither be especially burdensome nor particularly effective.”
Judge Pitman ordered the U.S. Marshals Service to arrest Schmidt and Dunlap and deliver them into federal custody in the Western District of Texas.
The judge gave Nicole Bowdler a “final opportunity” to comply with his orders, as she had a “lesser role” in the alleged cryptocurrency scheme. Bowdler has until this Friday to provide proof in writing that she has complied with the court’s orders.
Additionally, all defendants have to provide an accounting of the investors’ funds, their usage, and the current location.