New York Man Arrested for Alleged $1.8M Crypto Mining Scam

Authorities say 37-year-old Chet Stojanovich promised to take a customer on 31-hour road trip to see the non-existent mining equipment in Canada – and then abandoned him at the Buffalo airport.

AccessTimeIconApr 21, 2022 at 6:12 p.m. UTC
Updated Apr 22, 2022 at 4:57 p.m. UTC

Cheyenne Ligon is a CoinDesk news reporter with a focus on crypto regulation and policy. She has no significant crypto holdings.

The Federal Bureau of Investigation arrested a 37-year-old man on Wednesday it says defrauded more than a dozen victims out of a total of $1.8 million in a long-running crypto mining scam.

Between March 2019 and September 2021, officials say Chester “Chet” Stojanovich posed as a dealer of crypto mining equipment, convincing his would-be customers to fork over large payments for mining machines and miner-hosting services, which Stojanovich promised to arrange at a facility in Goose Bay in Canada's Newfoundland and Labrador province.

According to a complaint, Stojanovich never followed through on his promises and kept the majority of the money for himself.

Stojanovich is not the first person to be accused of running an elaborate scam involving crypto mining equipment. In 2020, a 60-year-old California man was arrested and charged with running a series of schemes, including a fake crypto mining operation that bilked five investors out of $550,000, half of which he spent on himself at casinos, restaurants, and hotels.

Stojanovich’s alleged scam is small potatoes compared with other crypto mining grifts. The notorious BitClub Ponzi scheme defrauded investors of $722 million over five years, purporting to sell shares of nonexistent crypto mining pools to gullible investors – only to pay them back with money from newer investors.

But unlike BitClub, Stojanovich’s alleged scam was not a Ponzi scheme – it was just old-fashioned fraud. He allegedly blew the majority of his customers’ cash on chartering flights on private jets and traveling in limousines, paying off more than $80,000 in personal credit card debt, throwing lavish parties and giving money to his wife.

The alleged scheme

According to the complaint, Stojanovich and various companies under his control, including Chet Mining, Chet Mining Canada and Phoenix Data LLC, told investors that he would purchase mining equipment on their behalf and then host that equipment at the Goose Bay facility for a set number of months.

However, the FBI alleges that Stojanovich did not purchase the equipment as promised, but instead “employed deceptive practices to create the illusion that such miners had been acquired and were being sued to provide hash power to the accounts of [his] customers.”

Stojanovich allegedly purchased a total of 72 S9 Miners from Amazon, and two other miners from eBay, which he largely used as props in the scheme. (He took payment from customers for nearly 1,500 S9 miners and over 1,500 L3 miners.)

When his customers grew suspicious and asked for evidence of their purchases, Stojanovich would send them photos of the miners he had bought, as well as photos of himself standing near the piled-up boxes, according to the complaint.

In one instance, an unnamed customer who had ordered 912 S9 miners from Stojanovich insisted that Stojanovich provide proof of the purchase, including “serial numbers, insurance policy documents or shipping documents.” When Stojanovich could not provide the proof, the customer demanded that he be taken to the purported hosting facility in Goose Bay – a 31-hour drive from New York City – to see his purchase for himself.

According to the FBI, Stojanovich agreed and, around Memorial Day weekend in 2019, he and the customer got a rental car and headed to Goose Bay. However, things between the pair crumbled as they neared the border of Canada, and Stojanovich allegedly told the customer that he would not be able to see the miners after all.

The FBI alleges that “the trip ended abruptly, in Buffalo, New York, where Stojanovich abandoned [the customer] at the airport and stated in substance and part that he would not pay any refund.”

A former employee of Stojanovich told the FBI that, when his boss returned from the trip, he admitted he had never purchased the S9 miners the customer had paid for.

Stojanovich allegedly continued to use photos and phony evidence of nonexistent hash power to soothe worried customers, but around September 2019 he stopped responding to all texts and emails.

Two months later he resurfaced, only to tell customers that the owner of the alleged Goose Bay hosting facility had gone bankrupt and run away with their equipment.

Lawsuits and more alleged fraud

In June 2020, six of Stojanovich’s alleged victims filed suit against him and two of his companies, alleging “civil RICO violations, breach of contract, fraud, conversion and unjust enrichment.”

According to the FBI, however, being sued did not prevent Stojanovich from trying his hand at a second scam. Between August and September 2021, Stojanovich convinced three brokers who represented clients interested in buying mining equipment to pay him nearly $200,000 for a total of 127 miners.

The customers only received three miners between them, according to the complaint. When they demanded refunds, the FBI says Stojanovich sent a series of bad checks before eventually refunding only $61,000 of their money – thus keeping $119,000 for himself.

According to the complaint, Stojanovich spent this money on “unrelated purchases of internet domain names … products of Apple, Inc. … hotels/restaurants, and payments to his wife/partner” as well as “payments of more than $33,000 to an online casino.”

In early March 2022, Stojanovich was ordered by a New York judge to appear at a deposition in the lawsuit filed against him in 2020. According to the FBI, Stojanovich lied under oath about the whereabouts of his cellphone and, when allowed to return to his car to obtain his cellphone, hid for the duration of the deposition, only returning to the courthouse when everyone else had left.

After that, Stojanovich allegedly moved to Canada.

His failure to comply with the lawsuit resulted in a default judgment against him. Stojanovich was found to be in civil contempt of court – a finding that carries with it hefty monetary penalties and potential criminal action.

Stojanovich was arrested in Champlain, N.Y., on Wednesday and charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison. He will be arraigned in a Manhattan, N.Y., courthouse on Thursday.


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CoinDesk - Unknown

Cheyenne Ligon is a CoinDesk news reporter with a focus on crypto regulation and policy. She has no significant crypto holdings.

CoinDesk - Unknown

Cheyenne Ligon is a CoinDesk news reporter with a focus on crypto regulation and policy. She has no significant crypto holdings.

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