Monday, July 29th, 2019

Circuit Affirms Convictions and Sentences for Bitcoin-Related Fraud

In United States v. Lebedev, No. 17-3691(L) (2d Cir. July 26, 2019), defendants Lebedev and Gross challenged their convictions, after a jury trial, of multiple counts arising from their roles in the operation of a Bitcoin exchange and a scheme to use a federal credit union for illegal purposes. Gross also challenged the application of several Sentence Guidelines provisions in imposing his sentence and his order of restitution. The Circuit affirmed.

First, the Court rejected Lebedev’s challenge to the sufficiency of the evidence. The evidence was sufficient to establish wire fraud, the Court held, because a reasonable jury could conclude, inter alia, that Lebedev deprived the victims (certain financial institutions) of “the right to control their assets by mispresenting potentially valuable economic information.” Similarly, the evidence was sufficient to establish bank fraud because a reasonable jury could conclude that Lebedev (1) caused false information to be sent to financial institutions to disguise the fact that their customers were transacting business with an unregistered Bitcoin exchange; and (2) did so with the intent to obtain funds under those institutions’ custody and control.

Second, the Court upheld various evidentiary rulings made at trial. For example, the district court did not abuse its discretion in concluding that the testimony of a particular witness, who worked as an accountant and litigation consultant, was not improper expert testimony. Rather, his testimony was being offered merely to provide a summary of financial records.

Nor did the district court err in admitting certain co-conspirator statements. The defense contended that Gross had withdrawn from the conspiracy by the time the challenged co-conspirator statements were made. But the district court did not clearly err in concluding that the conspiracy was still ongoing on the dates in question.

Further, the Circuit rejected defense arguments that the district court had (1) improperly restricted the testimony of a defense witness; (2) erroneously permitted the government to introduce evidence under Fed. R. Evid. 404(b) without providing the required notice; and (3) constructively amended the indictment.

Finally, the Circuit rejected Gross’s arguments that the district court had procedurally erred in imposing his sentence and restitution order.

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