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Magdaleno Mendoza, a senior promoter of the IcomTech cryptocurrency Ponzi scheme, was sentenced to 71 months in federal prison this week for defrauding primarily Spanish-speaking, working-class investors of millions of dollars through a fake crypto mining operation.
The sentencing in the Southern District of New York also requires Mendoza to pay $789,218 in restitution and forfeit $1.5 million plus a California residence purchased with fraudulent proceeds from the scheme, which collapsed in 2019 after promising guaranteed daily returns that never materialized.
The Crypto Ponzi case centers on IcomTech, a company launched in mid-2018 that claimed to offer profitable cryptocurrency mining and trading services. By the end of 2019, the scheme had collapsed, leaving thousands of investors unable to withdraw funds that appeared as profits on internal dashboards.
According to court filings, IcomTech was never engaged in legitimate crypto mining or trading at scale. Instead, it functioned as a multi-level marketing operation in which new investments were used to pay earlier participants, creating the illusion of consistent returns.
Mendoza, identified as one of the most senior promoters, helped organize recruitment events, collected cash from investors, and maintained close contact with the scheme’s founder, David Carmona.
The U.S. Attorney’s Office for the Southern District of New York detailed how promoters used luxury cars, branded merchandise, and large gatherings to project success and credibility.
These tactics, prosecutors said, were central to sustaining the fraud until withdrawal delays and mounting complaints exposed the operation’s fragility.
As the Crypto Ponzi case progressed, evidence showed that warning signs began appearing as early as August 2018. Investors reported delayed withdrawals, new fees, and shifting explanations from promoters.
Eventually, IcomTech introduced a proprietary token known as “Icoms,” which was effectively worthless, in an effort to keep victims’ funds locked inside the system.
Many investors relied on word-of-mouth endorsements from friends, family members, and community leaders, a factor that amplified losses when the scheme collapsed.
Internal dashboards continued to display phantom profits even as access to real funds disappeared, a tactic commonly seen in large-scale frauds.
Victims ultimately lost millions of dollars. As part of his sentence, Mendoza was ordered to pay $789,218.94 in restitution and to forfeit $1.5 million, along with a residence in Downey, California, purchased using proceeds from the scheme.
Beyond the individual conviction, the Crypto Ponzi case has broader implications for regulators, policymakers, and crypto investors.
Authorities say the case illustrates how fraudsters adapt familiar financial crime models to new technologies while exploiting gaps in oversight and financial inclusion.
Ari Redbord, global head of policy at blockchain intelligence firm TRM Labs and a former U.S. attorney, explained why schemes like IcomTech often focus on specific communities.
“These schemes also exploit real barriers—limited access to traditional financial services, less exposure to regulatory warnings,” — Ari Redbord, Global Head of Policy, TRM Labs.
Redbord also described the persistence of such frauds as “one of the hardest challenges,” noting that promoters frequently rebrand and move across jurisdictions after a scheme collapses.
Courts, however, are increasingly treating crypto fraud on par with traditional financial crimes.
Mendoza’s 71-month sentence reflects an emphasis on the scale of losses and the impact on victims, rather than the novelty of the underlying technology.
Prosecutors have signaled that similar cases will continue to draw severe penalties as enforcement capabilities improve.
The IcomTech prosecution shows how a Crypto Ponzi case can leave lasting damage well beyond financial losses, eroding trust within close-knit communities and reinforcing skepticism around digital assets.
With co-conspirators, including the scheme’s founder, also facing convictions, the case stands as a warning to both promoters and investors.
