United States v. Felton

1

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. RYAN FELTON, Defendant-Appellant.

No. 22-14215

United States Court of Appeals, Eleventh Circuit

February 29, 2024

DO NOT PUBLISH

Appeal from the United States District Court for the Northern District of Georgia D.C. Docket No. 1:20-cr-00347-JPB-JSA-1.

Before WILSON, BRANCH, and JULIE CARNES, Circuit Judges.

PER CURIAM:

Defendant appeals the 70-month sentence he received after pleading guilty to numerous counts of wire fraud, money laundering and securities fraud related to two cryptocurrency schemes that resulted in investor losses of over two million dollars. Defendant argues the sentence is procedurally and substantively unreasonable because the district court erred by applying a sophisticated means enhancement and declining to adjust his offense level for acceptance of responsibility. After careful review, we reject Defendant's arguments and AFFIRM his sentence.

BACKGROUND

Defendant was charged in a November 2021 superseding indictment with sixteen counts of wire fraud in violation of 18 U.S.C. § 1343, ten counts of money laundering in violation of 18 U.S.C. § 1957, and two counts of securities fraud in violation of 15 U.S.C. §§ 78j and 78ff. He pled not guilty, and a jury trial commenced in July 2022. After three days of trial, however, he reversed course and pled guilty to most of the charges asserted against him.

Based on the factual proffer submitted in support of the plea and the undisputed facts in the presentence report ("PSR"), the charges stemmed from two cryptocurrency schemes Defendant conducted between August 2017 and August 2018 involving projects known as FLik and CoinSpark. Investors lost a total of approximately $2.5 million in the two schemes.

Defendant founded FLiK with the purported purpose of funding and creating a platform to stream television and film pro-jects.^[1] He then promoted the sale of "FLiK tokens"-a type of cryp-tocurrency-to investors in various online platforms and in an initial coin offering ("ICO").^[2] In these promotional materials, Defendant misrepresented that FLiK investment proceeds would be used to fund television and film projects, that celebrities and other well-known figures were involved in the project, that Defendant was in discussion with major film studios to obtain content for FLiK, and that the United States military had agreed to carry FLiK as a streaming platform available to nearly two million service members. Defendant admitted that these representations were false, and expert testimony established that most if not all the proceeds raised from the purchase of FLiK tokens were diverted to Defendant's personal use. Defendant also represented that FLiK tokens would appreciate, and he encouraged investors to wait until the tokens reached a peak resale price before selling them. Those representations were part of Defendant's scheme to artificially inflate or "pump" the value of FLiK cryptocurrency so he could later sell or "dump" his own holdings of the currency at an elevated price.

In addition to FLiK, Defendant created another cryptocurrency called CoinSpark, which he promoted and sold to investors online and in a separate ICO. Defendant falsely represented in the promotional materials for CoinSpark that investors would receive a dividend, that CoinSpark's financial statements would be audited, and that any unsold tokens would be disposed of to keep the price and demand for CoinSpark currency high. He also made other misrepresentations in connection to CoinSpark, including spreading false information in an article he published under a fake name. As with the FLiK scheme, Defendant diverted most of the CoinSpark investment proceeds to his personal use via a convoluted process of converting his CoinSpark holdings into dollars and transferring those funds into multiple and various types of cryptocurrency and financial accounts. Defendant used the funds generated from both CoinSpark and FLiK to buy luxury goods, including a home, vehicles, and jewelry.

The PSR assigned Defendant a base offense level of 7 for his wire and securities fraud counts pursuant to USSG § 2B1.1(a)(1). It added 16 levels under USSG § 2B1.1(b)(1)(I) because the loss caused by the offense exceeded $1.5 million but was less than $3.5 million, 2 levels under USSG § 2B1.1(b)(2)(A)(ii) because the offense was committed through mass marketing, and 2 levels under USSG § 2B1.1(b)(10)(C) because the offense involved sophisticated means. Explaining the sophisticated means enhancement, the PSR noted that Defendant's offense involved creating two unique cryptocurrencies, promoting the sale of those cryptocurrencies by means of repeated and elaborate misrepresentations to investors and orchestrating a pump and dump scheme with respect to the currencies that enabled him to sell his holdings of them at an inflated price. Adjusting for the enhancements, the PSR calculated Defendant's offense level as 27 for his wire and securities fraud counts.

The PSR assigned Defendant a base offense level of 27 for his money laundering counts, per the guidelines instruction to apply the base offense level for the underlying offense from which the laundered funds were derived. It added 1 level under USSG § 2S1.1(b)(2)(A) because Defendant was convicted under 18 U.S.C. § 1957, resulting in an adjusted offense level of 28. Grouping all of Defendant's counts as instructed by USSG § 3D1.2(c), the PSR calculated Defendant's adjusted offense level as 28. It declined to apply an acceptance of responsibility adjustment under USSG § 3E1.1, explaining that despite his guilty plea, Defendant had put the Government to its burden of proof by "denying the essential factual elements of guilt for three days of a [j]ury trial."

The PSR assigned Defendant a criminal history score of I after describing various convictions for minor driving offenses in addition to two convictions involving theft and false statements. It listed several additional charges involving domestic violence, theft by receiving stolen property criminal impersonation, and contempt of court, but those charges were dismissed and did not factor into Defendant's criminal history score. Based on a criminal history score of I and a total offense level of 28, the PSR calculated Defendant's guidelines range as 78 to 97 months. It noted that the statutory maximum on the wire fraud and money laundering counts was 20 years, that the statutory maximum on the securities fraud counts was 10 years, and that none of the counts required a mandatory minimum.

Defendant objected to the PSR on two grounds that are relevant here.^[3] First, he argued that the sophisticated means enhancement the PSR recommended applying under USSG § 2B1.1(b)(10)(C) was not warranted, and that his adjusted offense level should thus be 26 instead of 28. Second, he argued he was entitled to a 2-level reduction in his offense level pursuant to USSG § 3E1.1 for acceptance of responsibility. Together, these adjustments would have resulted in an offense level of 24 and a recommended guidelines sentence of 51 to 63 months.

The district court rejected both of Defendant's sentencing arguments. Noting that the relevant guideline defines sophisticated means as "especially complex or especially intricate offense conduct," the court found the Government had shown such conduct "in spades" in this case. In support of its finding, the court emphasized that Defendant had used his expertise in digital assets and cryptocurrency platforms, as well as his specialized knowledge about managing various types of accounts and creating compa-nies-including companies outside the United States in lucrative foreign markets-to commit the offenses underlying his convictions. The court explained further that the numerous misrepresentations Defendant had used to "pump and dump" both cryptocurrencies were indicative of a complex and sophisticated scheme.

As to acceptance of responsibility, the court found that Defendant had not shown a downward adjustment was warranted. The court stressed the delay in Defendant's decision to plead guilty, coming as it did in the middle of a complex trial and after the Government had secured the presence of multiple international witnesses and a cryptocurrency expert. It also noted that Defendant had not demonstrated any of the other indicators of acceptance of responsibility set out in the guidelines, such as voluntarily terminating or withdrawing from the offense conduct, offering to pay restitution surrendering to the authorities, assisting the authorities, or undertaking post-offense rehabilitation efforts.

After ruling on the objections, the district court adopted the findings and recommendations in the PSR, including its calculation of Defendant's total offense level of 28 and his guidelines range of 78 to 97 months. The court subsequently heard arguments from the parties as to their recommendations for a reasonable sentence considering the 18 U.S.C. § 3553(a) factors. Defendant asked the court to vary down and sentence him to 46 months, and the Government asked for a sentence in the middle of the guidelines range. Ultimately, the court varied down slightly and sentenced Defendant to 70 months as to each count of conviction, to be served concurrently and to be followed by a 3-year term of supervised release. The court stated that this sentence was made in view of the § 3553(a) factors, including the nature and circumstance of the offense and the need to afford adequate deterrence and protect the public, among other factors, and that it was "sufficient but not greater than necessary to comply with the directives of [§] 3553(a)." It affirmed that its sentence would have been the same regardless of its ruling on the disputed...