Bitcoin Pyramid Scheme Mastermind Sentenced to Seven Years

Valeria Fedyakina, a 30-year-old mother from Simferopol, has been sentenced to seven years in prison for orchestrating a $23 million Bitcoin pyramid scheme. Known by the alias "Bitmama," Fedyakina defrauded investors by posing as a crypto expert and promising to help them bypass Western sanctions imposed on Russia after its Ukraine invasion. She operated under the brand names “Bitmama” or “Bitmama Finance,” claiming to facilitate the conversion of funds into crypto offshore, primarily in Dubai. Her scheme involved promising a 1% bonus on every transaction, which attracted many clients who handed her large sums of cash.

Behind the facade of a legitimate operation, Fedyakina was running a pyramid scheme. Instead of investing client funds, she allegedly funneled the money into her own crypto wallets in the UAE. In just 60 days during 2023, four victims alone lost a staggering 2.2 billion rubles, equivalent to $23 million. Some days saw transactions as high as $15 million, often processed in luxury Moscow hotels where she arranged meetings with clients. The Russian Investigative Committee reported that Fedyakina pretended to be an investor in the oil, gold, and general commodity market, acting with "criminal intent to steal money or crypto by deceiving an ‘indefinite’ number of people."

Fedyakina's downfall began in September 2023 when her pyramid scheme started to unravel, and investors became suspicious. She attempted to flee Russia for the UAE, known for its crypto-friendly policies and loose KYC/AML enforcement. However, she was arrested at the border while trying to leave the country. At the time of her arrest, Fedyakina was six months pregnant. She later gave birth to her daughter and was imprisoned with her daughter at Moscow’s SIZO No. 6 detention center.

Last week, the Presnensky District Court in Moscow sentenced Fedyakina to seven years in a penal colony, a reduction from the initially sought 10 years by prosecutors under Russian fraud laws. In addition to her jail time, Fedyakina has been ordered to repay the full $23 million in compensation to her victims. This incident highlights an ongoing trend in Russia where individuals and entities are increasingly using crypto to avoid sanctions and fund illegal operations. The use of cryptocurrency for such purposes continues to be a significant concern, with new cases emerging almost daily.