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SEC announces charges in alleged $295 million crypto Ponzi scheme

On Behalf of | Nov 21, 2022 | Blog, Cryptocurrency

In a recent complaint, the Securities and Exchange Commission (SEC) announced charges against four individuals allegedly involved in a cryptocurrency Ponzi scheme that took in money from more than 100,000 investors worldwide. The individuals are charged in connection with their roles in operating and promoting a multi-level marketing program, known as Trade Coin Club, that raised more than $295 million in digital assets.

According to the SEC, investors were lured by false representations that Trade Coin Club’s crypto asset trading bot conducted millions of microtransactions each second. Investors were allegedly told that they could receive daily minimum returns of 0.35%.

SEC: Investor withdrawals entirely from other investors’ deposits

The SEC alleges that the founder of Trade Coin Club used investor funds for personal gain and to pay a worldwide network of promoters, including the other three individuals named in the complaint. According to the complaint, investors’ withdrawals came from other investors’ deposits and not from the purported crypto asset trading bot advertised by Trade Coin Club.

The founder of Trade Coin Club is accused of personally receiving bitcoin investments at the time valued at $55 million, while the other three parties named in the complaint are accused of receiving bitcoin amounts valued between $625,000 and $2.6 million. The alleged Ponzi scheme operated between 2016 and 2018, according to the SEC.

The specific violations alleged

The individuals named in the complaint are accused of violating a variety of provisions under federal securities laws, including securities registration, broker-dealer registration and antifraud provisions. The SEC is seeking civil penalties, injunctive relief and disgorgement. One of the accused individuals has already agreed to settle the charges without denying or admitting the allegations. That settlement will require court approval.

A wider crackdown on crypto securities law violations

With multiple high-profile crypto cases in recent months, regulatory agency chiefs have signaled their zeal for pursuing individuals and companies suspected of securities law violations. If you have questions or concerns about legal exposure related to these matters, we encourage you to contact the crypto securities law attorneys at Ford O’Brien Landy LLP. With offices in New York City and Austin, Texas, we advise and represent clients nationwide.

Source: U.S. Securities and Exchange Commission, “SEC Charges Creator of Global Crypto Ponzi Scheme and Three US Promoters in Connection with $295 Million Fraud,” Nov. 4, 2022