Crypto-Ponzi Prosecutions: Prior-Fraud 404(b) Evidence and “Red Flag” Willful Blindness Sustain Wire-Fraud Conspiracy Convictions (United States v. Carmona)

Introduction

In United States v. Carmona (2d Cir. Apr. 15, 2026) (summary order), the Second Circuit affirmed amended judgments arising from the “IcomTech” cryptocurrency Ponzi scheme, which was marketed as a crypto-focused multi-level marketing (“MLM”) opportunity but operated as a fraud.

The principal defendants were: David Carmona (founder; pleaded guilty), Gustavo Rodriguez (website designer; convicted after trial), and David Brend (top promoter; convicted after trial). All were charged with conspiracy to commit wire fraud in violation of 18 U.S.C. § 1343, sentenced to imprisonment and supervised release, and ordered to pay forfeiture and restitution.

On appeal, the defendants raised: (1) sufficiency of the evidence regarding Brend’s knowledge; (2) evidentiary rulings concerning other Ponzi schemes and “lawful MLM” participation; (3) admission of victim-impact evidence; (4) the propriety of a conscious avoidance instruction; (5) denial of a mistrial based on a jury note about juror confidentiality; (6) alleged procedural sentencing error (primarily loss calculation); and (7) ineffective assistance of counsel.

Summary of the Opinion

The Second Circuit affirmed in full. It held that the trial evidence supported Brend’s knowing participation; the district court’s evidentiary rulings were within its discretion (and any assumed error as to victim-impact proof was harmless); the conscious avoidance instruction was supported by a sufficient factual predicate (and, in any event, harmless given the actual-knowledge instruction and strength of the evidence); the mistrial denial was not an abuse of discretion; the loss amount used at sentencing was a reasonable estimate supported by the record; and the ineffective-assistance arguments failed (or, for Rodriguez, were deferred to potential § 2255 litigation).

Analysis

Precedents Cited

1) Sufficiency of the Evidence

  • United States v. Requena, 980 F.3d 30 (2d Cir. 2020): Reaffirmed the appellate posture—evidence viewed in the government’s favor with reasonable inferences resolved for the verdict.
  • United States v. Valle, 807 F.3d 508 (2d Cir. 2015): Applied the “any rational trier of fact” standard, underscoring the defendant’s heavy burden.

These cases framed the court’s conclusion that Brend’s conduct (directing victim payments to a shell company, use of false memo lines, structuring transactions, “lulling” investors, and leveraging purported ties to leadership) allowed a rational juror to infer knowledge of the unlawful objective.

2) Evidentiary Discretion and Harmless Error

  • United States v. Rowland, 826 F.3d 100 (2d Cir. 2016) and United States v. Fazio, 770 F.3d 160 (2d Cir. 2014) (quoting In re Sims, 534 F.3d 117 (2d Cir. 2008)): Supplied the abuse-of-discretion framework and “range of permissible decisions” principle.
  • United States v. Garcia, 413 F.3d 201 (2d Cir. 2005) (quoting United States v. Dukagjini, 326 F.3d 45 (2d Cir. 2003)) and Kotteakos v. United States, 328 U.S. 750 (1946): Anchored the “substantial right”/“substantial and injurious effect” harmless-error test used to reject Rodriguez’s prejudice claim even assuming victim-impact error.
  • United States v. Gata-Aura, No. 22-283, 2024 WL 389422 (2d Cir. Feb. 2, 2024) (summary order): Supported admitting prior fraud evidence when the defense claims the defendant was “tricked” or merely a “conduit,” making intent/absence of mistake especially probative.

3) Rule 404(b) “Other Bad Acts” vs. “Good Acts”

  • United States v. Dawkins, 999 F.3d 767 (2d Cir. 2021) (quoting United States v. Scarpa, 897 F.2d 63 (2d Cir. 1990)) and United States v. Damti, 109 F. App’x 454 (2d Cir. 2004) (summary order): Reiterated that defendants generally cannot introduce “good acts” evidence to imply they acted in conformity with past lawfulness—i.e., the propensity inference Rule 404(b) aims to prevent.
  • United States v. Roldan, 167 F.4th 569 (2d Cir. 2026): Recognized the narrow path for “good acts” evidence when it bears directly on state of mind rather than character—yet the panel found Brend did not specify what evidence he sought or why it met that standard.

4) Conscious Avoidance (Willful Blindness)

  • United States v. Aina-Marshall, 336 F.3d 167 (2d Cir. 2003): Set the de novo review standard for jury-instruction error, requiring prejudicial error when the charge is viewed as a whole.
  • United States v. Graham, 51 F.4th 67 (2d Cir. 2022): Confirmed “conscious avoidance” is also termed “willful blindness.”
  • United States v. Fofanah, 765 F.3d 141 (2d Cir. 2014): Provided the two-part predicate—defendant claims lack of knowledge; evidence supports awareness of a high probability plus deliberate avoidance of confirmation.
  • United States v. Wedd, 993 F.3d 104 (2d Cir. 2021): Critically, endorsed that under “sufficiently suspicious circumstances,” a failure to ask questions may itself support conscious avoidance.
  • United States v. Ferguson, 676 F.3d 260 (2d Cir. 2011): Treated “red flags” as evidence of both actual knowledge and conscious avoidance.
  • United States v. Ferrarini, 219 F.3d 145 (2d Cir. 2000): Supplied the alternative harmlessness principle—if actual-knowledge instruction is given and evidence of actual knowledge is overwhelming, an erroneous conscious-avoidance charge can be harmless.

Applying these standards, the court relied on evidence that Rodriguez built the website displaying ever-increasing “earnings” and, in communications with Carmona, warned the site might “get a lot of exposure” and “look[] more Ponzi-like,” supporting both red-flag awareness and deliberate non-confirmation.

5) Mistrial and Juror Concern Note

  • Renico v. Lett, 559 U.S. 766 (2010): Emphasized mistrial is an extraordinary remedy, to be used with “greatest caution.”
  • Arizona v. Washington, 434 U.S. 497 (1978): Supported deference to trial judges evaluating possible juror bias.
  • United States v. Ruggiero, 928 F.2d 1289 (2d Cir. 1991): Illustrated when fear is tethered to external events (e.g., being approached at home), and reiterated broad discretion over whether/how to question jurors.

The panel found the note about post-trial confidentiality did not evidence external tampering or fear caused by trial-related threats, and the judge had already instructed the jury not to decide based on fear or sympathy.

6) Procedural Reasonableness and Loss Calculation

  • United States v. Cavera, 550 F.3d 180 (2d Cir. 2008) (en banc): Listed procedural sentencing errors, including erroneous Guidelines calculations or clearly erroneous factfinding.
  • United States v. Rubenstein, 403 F.3d 93 (2d Cir. 2005): Established de novo review for Guidelines interpretation and clear-error review for factual findings.
  • United States v. Lacey, 699 F.3d 710 (2d Cir. 2012): Reaffirmed that the sentencing court need only make a “reasonable estimate” of loss and that deference is heightened when the judge presided over a lengthy trial.
  • United States v. Lewis, 62 F.4th 733 (2d Cir. 2023): Supported enhancements where conduct exceeds mere denial of guilt—here, Brend’s sworn assertions were contradicted by trial proof of personal use of victim funds; also consistent with “sophisticated means” commentary concerning shell entities.
  • United States v. Thompson, 921 F.3d 82 (2d Cir. 2019); United States v. Moseley, 980 F.3d 9 (2d Cir. 2020) (quoting United States v. Elefant, 999 F.2d 674 (2d Cir. 1993)): Reinforced harmlessness where sentences were well below the Guidelines and the district court stated it would impose the same sentences regardless of the disputed range.

The court accepted the district judge’s $25–$65 million loss bracket as a reasonable estimate supported by trial evidence (including the “Hernandez spreadsheet” reflecting roughly $58 million invested by approximately 24,000 individuals and a screenshot showing at least $21 million in earnings before collapse). The panel also underscored that any Guidelines dispute was independently rendered harmless by the district court’s explicit alternative-sentence statement and the substantial downward variances.

7) Ineffective Assistance of Counsel

  • Strickland v. Washington, 466 U.S. 668 (1984): Controlled the analysis—objective unreasonableness plus prejudice; allowed courts to reject claims on lack of prejudice without grading performance.
  • Massaro v. United States, 538 U.S. 500 (2003) and United States v. Morris, 350 F.3d 32 (2d Cir. 2003): Supported the decision to defer Rodriguez’s ineffective-assistance claim to a potential 28 U.S.C. § 2255 proceeding, where factual development is better suited.

Legal Reasoning

  1. Knowledge can be proven circumstantially through “operational” acts of fraud. The court treated the mechanics of Brend’s conduct—routing checks to a shell company, using false check memos, structuring around reporting thresholds, and “lulling” victims—as classic circumstantial proof that he understood the unlawful objective rather than innocently marketing an MLM.
  2. Rule 404(b) prior-fraud evidence becomes more probative when the defense is “I was duped.” The panel accepted that other crypto-Ponzi promotions were admissible to show intent and absence of mistake, especially to rebut Brend’s defense that he was merely a conduit or victim.
  3. “Good acts” evidence is generally inadmissible when it invites a conformity inference. Evidence of lawful MLM participation, without a targeted link to the defendant’s knowledge or intent regarding IcomTech, was treated as improper character-based reasoning.
  4. Conscious avoidance is justified by “red flags,” including suspicious business artifacts. The court emphasized that constructing and maintaining a key tool of the fraud (a website showing steadily rising earnings) and expressing concern it looked “Ponzi-like” provided a factual predicate for willful blindness—particularly where a defendant claims lack of knowledge.
  5. Mistrial is reserved for urgent, obvious causes; vague confidentiality concerns are not enough. The jury note did not establish external influence or intimidation, and the judge’s decision not to probe deliberations further fell within broad discretion.
  6. Loss findings need only be reasonable estimates, and alternative-sentence statements can render Guidelines disputes harmless. The sentencing analysis illustrates two reinforcing appellate stabilizers: (a) deference to reasonable loss estimation grounded in trial evidence; and (b) harmlessness when the judge states the same sentence would apply notwithstanding the Guidelines issue.

Impact

Although designated a non-precedential summary order, Carmona meaningfully signals how the Second Circuit is likely to evaluate recurring issues in complex crypto-fraud prosecutions:

  • Promotion-role defendants face heightened risk from “pattern” evidence. Where marketers claim ignorance, courts may readily admit other fraud promotions to prove intent/knowledge and negate mistake under Rule 404(b).
  • “Red flag” web-operations evidence can support both actual knowledge and willful blindness. Designers/operators of investor-facing platforms may be vulnerable to conscious-avoidance instructions where platform features resemble hallmark Ponzi signals (e.g., implausible, ever-increasing returns).
  • Sentencing challenges may fail even when loss is debatable. If the judge makes an alternative-sentence record and imposes a below-Guidelines sentence, appellate courts may treat Guidelines disputes as harmless—placing a premium on building a robust factual and § 3553(a) record at sentencing.
  • Victim-impact evidence disputes often turn on prejudice. Even arguable overreach may not yield reversal if there is strong independent evidence of guilt and the appellant cannot show a substantial influence on the verdict.

Complex Concepts Simplified

Conspiracy to commit wire fraud (18 U.S.C. § 1343)
An agreement to carry out a fraud using interstate wires (e.g., electronic communications/transactions), plus knowing participation. The government can prove knowledge by circumstantial evidence.
Rule 404(b) evidence
Evidence of “other acts” is not admitted to show a person is generally the kind of person who commits crimes, but it can be admitted for specific purposes like intent, knowledge, or absence of mistake.
“Good acts” evidence
Proof that a defendant did lawful things in the past is usually excluded when offered to suggest, “so he must have acted lawfully here.” Courts sometimes allow it if it directly illuminates the defendant’s state of mind about the charged conduct, but the relevance must be concrete and specific.
Conscious avoidance / willful blindness
A way to prove the required knowledge when a defendant strongly suspects a fact (e.g., “this is a Ponzi”) but deliberately avoids confirming it. In the Second Circuit, failing to ask obvious questions amid suspicious circumstances can support the inference.
Procedural reasonableness (sentencing)
Focuses on whether the judge correctly calculated the Guidelines, relied on accurate facts, and properly considered statutory sentencing factors. Even if there is an error, it may be “harmless” if it did not affect the sentence imposed.
“Reasonable estimate” of loss (U.S.S.G. § 2B1.1)
The judge need not compute loss with mathematical precision; the estimate must be reasonable and supported by evidence, especially in large frauds with imperfect records.
Alternative sentence / harmless Guidelines error
If a judge states on the record that the same sentence would be imposed regardless of a disputed Guidelines calculation, appellate courts may treat a potential Guidelines error as harmless—particularly when the sentence is already below the advisory range.

Conclusion

United States v. Carmona affirms a broad, pragmatic approach to proving knowledge in crypto-Ponzi cases: operational conduct, financial structuring, and “lulling” communications can sustain sufficiency; prior fraud promotions may be admitted under Rule 404(b) to rebut “I was a dupe” defenses; and “red flags” can justify a conscious-avoidance instruction, especially for defendants responsible for investor-facing infrastructure. On sentencing, the decision underscores the appellate resilience of reasonable loss estimates and the power of an explicit alternative-sentence statement to defeat Guidelines-based procedural challenges.