The former chief technology officer of Blockparty was arrested on Wednesday after U.S. prosecutors alleged he stole more than $1 million in cash and cryptocurrency from the company, which operates a marketplace for non-fungible tokens.
Rikesh Thapa, 28, of San Diego, California, co-founded the company in 2017 and left it in 2019 after refusing to return $1 million in company funds he agreed to hold in his bank account while Blockparty looked for another bank, prosecutors said. Thapa, who was arrested in Southern California, faces one count of wire fraud.
The case comes amid increased uncertainty in the cryptocurrency industry, which is in the midst of a downturn made worse by the collapse of crypto exchange FTX.
The federal public defender's office in San Diego, which typically represents defendants after their arrest, did not immediately respond to a request for comment.
A representative for Blockparty did not respond to a similar request.
Prosecutors allege in the indictment unsealed in Manhattan federal court on Wednesday that Thapa took $1 million from the company for "safekeeping" while it looked to diversify its banking options in case its main bank stopped doing business with crypto firms.
He spent the money instead on nightclubs, travel, clothing and other personal expenses, prosecutors said.
Thapa is also accused of stealing bitcoins from the company and deleting the email account of the company's chief executive to cover it up.
Prosecutors said Thapa traveled to Italy in July 2019 to sell some of the company's native cryptocurrency without authorization for what turned out to be counterfeit money.
Thapa could face up to 20 years in prison if convicted on the wire fraud charge.
Headquartered in New Jersey, Blockparty began as a platform for blockchain-based event ticketing, and launched a marketplace for non-fungible tokens or NFTs in 2020, according to the company's website.
NFTs are a blockchain-based asset representing a digital file such as an image, video or item in an online game. They exploded in popularity in 2021, as crypto-rich speculators rushed to cash in on rising prices, but sales volumes have slumped in recent months. (Reporting by Jody Godoy; Editing by Leslie Adler)