John A. DeSalvo was born in South Jersey (the 7 Southern Counties of New Jersey, which have their own traffic signs on Interstate Highways and sometimes known, as the author’s wife has informed him, as “The Sovereign State of South Jersey”). His birth occurred in 1976, the year of the Nation’s Bicentennial. He grew up in the Marmora section of Upper Township in Cape May County, near Beesley’s Point on the Great Egg Harbor Bay. We know he earned a high school or equivalent degree (a requirement for his later employment), and when he was 21, he went to work for the New Jersey Department of Corrections, most probably at the Southern State Correction Facility in the Delmont section of Maurice River Township in Cumberland County (sometimes known as Woodbine State Prison) some 21 miles from Marmora. He served as a New Jersey Corrections Officer from 1997 until 2010, rising to the rank of lieutenant, and at age 34 he retired after an “accidental disability” (according to published news reports). While a Corrections Officer, he also had a side job operating his own tanning salon, which he sold in 2004. After his disability retirement he began working, in 2011, as a manager at Harrah’s Resort & Casino in Atlantic City. And at some point, he also established and operated his own parking lot seal-coating company.

Being something of an entrepreneur and having observed the willingness of people to take risks (as at Harrah’s) to make more money, and in the face of COVID-19 restrictions on the economy, including casinos, DeSalvo opened an E*Trade Account with $380 on Jan. 19, 2021. He then began to solicit others to join what he called on his Facebook account the “E*Trade Invest Group” and send money to DeSalvo’s E*TRADE account. He promised he would invest their monies in options, stocks, and crypto assets, and asserted that the investors’ money “would grow significantly because of his investment expertise.” He even stated (as quoted in the Aug. 23, 2023 Complaint [the “Complaint”] the U.S. Securities and Exchange Commission [“SEC”] filed against him in the Federal District Court for the District of New Jersey): “I have been averaging close to 1200% over the last 2 years. I am in the top 1,000 percent in the world.”

As alleged in the Complaint, “[h]is pitch was simple … ‘sit back and relax and get rich.’” He invested at the outset in “highly speculative, near-expiration call options as well as equity securities.” However, NONE of DeSalvo’s claims were true. After some initial gains, the fund began a steep decline, and at the same time, DeSalvo began transferring money to pay his own personal expenses, including credit card bills. Of the $95,000 raised from 17 investors, he lost some $17,000 on bad investments, and (as mentioned in the Complaint), by the end of February 2021 he had misappropriated the other $78,000. DeSalvo blamed the total loss in part on “the White House’s infrastructure plans.”

Not content with this fraud on the unsuspecting (if not sufficiently diligent), DeSalvo moved on with some assistance from a police officer in Williamstown, Gloucester County, New Jersey (note that this police officer was not charged in the Complaint) with a scheme targeting (in the words of the SEC’s Aug. 23, 2023 Press Release [the “Press Release”] concerning DeSalvo) “law enforcement and first responders.” Beginning in November 2021, DeSalvo began selling crypto assets called Blazar Tokens, which he “pitched … as an alternative to state pension systems for police officers, fire personnel, and first responders.” Again, as the Complaint details, he used a sales document that claimed Blazar Tokens were “the first token or coin that is able to be purchased through payroll deduction every week,” and that “it will be taken out of one’s weekly earnings pretax similar to payments into a pension, 401k, IRA or any other retirement savings plans.” Indeed, DeSalvo claimed from the outset that Blazar Tokens had already “‘secured being listed as a Payroll Deduction in 11 states.’”

His marketing utilized online media, particularly Facebook groups related to law enforcement officer investing, as well as excited press releases. The Blazar Token investment contract specifically promised that “there will be absolutely no use of Blazar Token’s funds for the self-interest of any Member of Blazar Token’s management team.” DeSalvo also had the unmitigated gall to assert falsely in December 2021 that Blazar Token was a security registered with the SEC.

Author’s note: As of Aug. 23, 2023, NO crypto token had been registered with the Commission, which is the subject of continuing administrative disagreements at the Commission and in the Courts.

In any event, on April 21, 2022, Blazar Token was offered for trading on a crypto asset trading platform named “Pancake Swap.” In that connection, DeSalvo continued to make extraordinary claims as to how much Blazar Tokens would appreciate in value (in one case claiming 300%).  How well did DeSalvo do? He raised at least $623,888 from approximately 220 investors. What happened to their money? One dissident investor received back $21,353 in another crypto asset, which the Complaint states “was the only time any of the …investors received any money back from DeSalvo for their investment.” The Press Release reports that DeSalvo misappropriated investor funds, much of which he sent “to his personal crypto asset wallets and used to pay for a bathroom renovation.”

The Complaint requests that the Court:

1. permanently enjoin DeSalvo from violating Section 10(b) of the Securities Act of 1934, as amended, and Rule 10b-5 thereunder, as well as Section 5(a), 5(c) and 17(a) of the Securities Act of 1933 for fraudulently selling unregistered securities using false statements and material omissions;
2. permanently enjoin him from having any involvement with crypto asset securities [akin to a “penny stock” ban];
3. order him to disgorge his ill-gotten gains together with prejudgment interest; and
4. order him to pay civil penalties consistent with the nature and scope of the violations.

In the Press Release, the Chief of the SEC’s Crypto Assets and Cyber Unit notes that the “[C]omplaint alleges a brazen affinity fraud;” which has been a recurring area of concern to the SEC. “Affinity frauds” typically focus on in-grown groups such as ethnic minorities (Armenian, Chinese, Vietnamese, etc.) or religious (Jews, Mormons, Mennonites, etc.), and far less frequently on professions (teachers, or as in this case, law enforcement).  Here, DeSalvo targeted his brothers and sisters in law enforcement, the proverbial “Blue Wall.”

That particular targeting evoked an especially critical comment from Gurbir S. Grewal, SEC Director of Enforcement, quoted in the Press Release:

“What’s particularly offensive about this case is that DeSalvo used his status as a former corrections officer to gain the trust of fellow law enforcement personnel, a number of whom invested their saving with him.”

Grewal also noted:

“Rather than producing any returns or revolutionary technology, [DeSalvo] instead misappropriated and misused investor money.”

The regular recurrence of fraudulent investment schemes, including those aimed at specific groups (which have earned the designation “affinity fraud”), depends not only on human greed, but also on the human proclivity to seek through like-standing friends, a quick and easy road to wealth  -  a point the Complaint so clearly makes in citing DeSalvo’s pitch to the E*TRADE Invest Group – “sit back and relax and get rich.” One might have hoped that professional law enforcement personnel would have a heightened sense of skepticism from their own daily experiences. But once again we find that a wolf clad in the coat of a sheep is not only received as a member of the flock, but is also able to fleece his fellows.