85-year-old disbarred attorney admits role in $9.5 million crypto Ponzi scheme

David Kagel, 85, a former attorney in California, pleaded guilty to charges related to operating a fraudulent crypto scheme, according to a release from the U.S. Department of Justice.

Kagel was disbarred from the State Bar of California a year ago. However, he purportedly used his reputation as a lawyer to add legitimacy to a "cryptocurrency Ponzi scheme" on behalf of his co-conspirator, the DOJ said . The scheme defrauded investors out of more than $9.5 million worth of funds.

Kagel and the co-conspirator promoted a fraudulent crypto endeavor, misrepresenting to victims that it could earn them immense profits. Kagel acted as the co-conspirator's attorney, telling victims the co-conspirator held $11 million worth of bitcoin that could recuperate any potential losses and even used his firm's letterhead on documents to support those claims.

Kagel admitted to using victims' funds for personal use. He pleaded guilty to one count of conspiracy to commit commodity fraud and faces up to five years in prison.

"David Kagel abused his position as an attorney to earn the trust of investors and to endorse false statements about a purported cryptocurrency investment that was, in fact, a scam,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division, in the statement. "Kagel and his co-conspirators defrauded their victims out of millions of dollars and used the victims’ money to line their own pockets."

“When lawyers lend a veneer of legitimacy to fraudulent schemes, it can lead to devastating losses for victims," Argentieri added.

Why was Kagel disbarred? 

Kagel was first admitted to the State Bar of California in 1974, public government records show. Throughout his legal career, however, he received numerous disciplinary actions.

In 1988, Kagel purportedly made "materially false statements in a registration statement filed with the Securities and Exchange Commission (SEC) and subsequently attempted to conceal same by way of further misrepresentations to the SEC in response to their investigative inquiries," according to a legal document . Due to these actions, Kagel was suspended for six months from the State Bar of California in 1997.

Kagel then allegedly engaged in unsavory behavior with his client's funds in 2009.

"By issuing checks from his client trust account when he did not have sufficient funds in the account to pay those checks, [Kagel], through gross negligence, engaged in an act of moral turpitude in willful violation of Business and Professions Code," states Kagel's 2012 disciplinary action . "By using overdraft protection and depositing personal funds into his client trust account, [Kagel] commingled personal funds in a client trust account and misused same."

Over a decade later, the State Bar of California issued another investigation into Kagel in January 2022, also pertaining to the mismanagement of client funds.

By August 2022, the State Bar of California began petitioning for Kagel's disbarment. He was officially disbarred on April 21, 2023.