College Students Expelled Over $200K Crypto Scam, Parents File Lawsuit

SPRINGFIELD, IL, March 16 (Reuters) - A group of students from Springfield Tech University (STU) have been expelled after their blockchain research project, Blockify ($BLOCK), collapsed in a $200,000 scam, leaving investors empty-handed. What was supposed to be a school-endorsed node platform designed to improve decentralized networks turned into a coordinated rug pull, triggering an academic and legal firestorm.

The students—Jake Holloway, Ryan Patel, Sarah Lin, and Kevin Dawson—were all members of STU's Blockchain & Crypto Club, an organization meant to explore the technical and financial aspects of blockchain technology—not launch speculative tokens. Their project, Blockify, was originally proposed as an educational initiative, designed to help students learn about running blockchain nodes and securing decentralized transactions. It was even scheduled to be presented at an upcoming internship showcase with major tech firms.

However, rather than focusing on infrastructure development, the four students allegedly launched $BLOCK as a tradable token, hyping it as an "exclusive early-access utility" tied to the Blockify platform. Excitement quickly spread, and hundreds of students and faculty members poured money into the project, believing it to be a legitimate academic initiative.

Within days, all liquidity was drained, leaving Blockify holders with worthless tokens. Investigations later confirmed that over $200,000 had been stolen, with the funds vanishing into multiple wallets controlled by the students. The scandal worsened when the perpetrators began flaunting their newfound wealth on social media. Screenshots from Snapchat, Instagram, and X (formerly Twitter) showed lavish purchases, expensive dinners, and cryptic captions like "STU paid for this" and "Textbooks won't teach you this flip."

Once these posts went viral, it didn't take long for Dean Charles Whitmore to take action. All four students were expelled immediately, with Whitmore citing "severe ethical violations" and a "gross misuse of university resources."

"This project was never meant to be a cryptocurrency," Whitmore said in a press statement. "It was an academic exercise that was hijacked for personal profit. We refuse to let Springfield Tech University become a breeding ground for financial fraud."

Now, the parents of the expelled students have filed a lawsuit against the university, arguing that the punishment is excessive and that STU failed to provide proper oversight for student-led blockchain research. The legal filing claims that the university should have set clearer boundaries for the crypto club and that the students were simply "young entrepreneurs who got caught up in the hype."

"This wasn't a scam; it was a school project that got out of hand," said Laura Holloway, mother of Jake Holloway. "The school let them work on it, and now they're acting like these kids are criminals."

Despite the ongoing controversy, Blockify remains completely worthless, with $BLOCK still trading at zero. The original website and project materials have been deleted, and most early investors have written off their losses as an expensive lesson in trust.

As for the expelled students, their social media accounts have gone silent. But before deactivating, Kevin Dawson left one last message:

"If Web3 is the future, I guess we just got there too early."

Reporting by Michael Chen in Springfield; Editing by Ani O'Silva and Krishna Chandra Eluri

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