David Kagel, an 85-year-old former attorney from California, has pleaded guilty to charges related to his involvement in a fraudulent cryptocurrency scheme, according to the U.S. Department of Justice. The scheme, which defrauded investors of more than $9.5 million, was purportedly bolstered by Kagel's once-respected status in the legal community.

Kagel, disbarred by the State Bar of California in April 2023, allegedly exploited his reputation as a lawyer to lend credibility to the Ponzi scheme orchestrated by his co-conspirator. The DOJ revealed that Kagel and his accomplice misled investors with promises of substantial profits from a fraudulent crypto investment. As part of the deception, Kagel assured victims that the co-conspirator possessed $11 million in bitcoin to cover any potential losses, even using his firm's letterhead to endorse these false claims.

Court documents indicate that Kagel admitted to using investors' funds for personal expenses. He has pleaded guilty to one count of conspiracy to commit commodity fraud and could face a prison sentence of up to five years.

"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,” stated Principal Deputy Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division. "Kagel and his co-conspirators defrauded their victims out of millions of dollars and used the victims’ money to line their own pockets."

Argentieri also emphasized the damaging impact when legal professionals lend a veneer of legitimacy to fraudulent schemes, noting that such actions can lead to devastating financial losses for victims.

Kagel's legal career, which began when he was admitted to the State Bar of California in 1974, was marred by numerous disciplinary actions. In 1988, he made materially false statements in a registration statement filed with the Securities and Exchange Commission (SEC) and subsequently attempted to conceal these misrepresentations. This led to a six-month suspension from the State Bar in 1997.

In 2009, Kagel allegedly engaged in unethical behavior with client funds. According to a 2012 disciplinary action, he issued checks from his client trust account without sufficient funds and used personal funds to cover overdrafts, thereby commingling personal and client funds. This act of gross negligence was deemed a willful violation of the Business and Professions Code.

Despite these past infractions, it wasn't until January 2022 that the State Bar of California launched another investigation into Kagel for further mismanagement of client funds. By August 2022, the State Bar began petitioning for his disbarment, which was finalized on April 21, 2023.

Kagel's guilty plea marks a significant development in the ongoing effort to clamp down on fraudulent activities in the rapidly evolving cryptocurrency sector. His case serves as a stark reminder of the importance of strict regulatory compliance and the potential for severe consequences when trusted professionals betray that trust for personal gain.