SEC Takes Legal Action Against 17 Individuals Involved in Crypto Ponzi Scheme
The US Securities and Exchange Commission (SEC) has filed a lawsuit against 17 individuals who allegedly participated in a Crypto Ponzi scheme that defrauded over 40,000 victims and accumulated $300 million. The scheme was operated by Houston-based CryptoFX LLC and primarily targeted Latino investors in the United States and two other countries. This legal action follows the SEC’s previous emergency action in September 2022, which resulted in the shutdown of the CryptoFX scheme and charges against its leaders, Mauricio Chavez and Giorgio Benvenuto.
Crypto Ponzi Scheme Targets Latino Community
The SEC’s investigation revealed that CryptoFX functioned as a massive Ponzi scheme, specifically targeting Latino investors by promising financial freedom and guaranteed returns through cryptocurrency and foreign exchange investments. However, the scheme primarily relied on funds from new investors to repay earlier investors, with only a small portion of the raised funds actually being used for trading activities. Gurbir Grewal, director of the SEC’s Division of Enforcement, stated that CryptoFX deceived thousands of victims across multiple states and countries:
“In the end, the only thing that CryptoFX guaranteed was a trail of thousands upon thousands of victims stretching across ten states and two foreign countries. A scheme of that size requires lots of participants, and as today’s action demonstrates, we will pursue charges against not just the principal architects of these massive schemes, but all those who further their fraud by unlawfully soliciting victims.”
The complaint alleges that the 17 individuals from Texas, California, Louisiana, Illinois, and Florida served as leaders within the CryptoFX network. They enticed investors with unrealistic returns ranging from 15 to 100 percent but instead used the funds to pay returns to previous investors, provide commissions and bonuses to themselves and others involved, and finance their lifestyles.
Defendants Accused Of Defying Court Orders
The SEC’s legal action also highlights the defendants’ involvement in soliciting investments even after court orders were issued to halt the CryptoFX scheme. For example, Gabriel and Dulce Ochoa instructed investors to retract their complaints to the SEC in order to recover their investments. Additionally, Maria Saravia allegedly misled investors by claiming that the SEC’s lawsuit was fake.
The SEC’s complaint, filed in the US District Court for the Southern District of Texas, charges the defendants with various violations including antifraud, securities registration, broker-registration provisions, and whistleblower protection provisions. The SEC is seeking permanent injunctions, disgorgement with prejudgment interest, and civil penalties for each defendant.
While two defendants, Luis Serrano and Julio Taffinder, have agreed to final judgments without admitting or denying the allegations, their agreement is pending court approval. Serrano and Taffinder have agreed to pay a combined total of over $68,000 in civil penalties, disgorgement, and interest.
Hot Take: Protect Yourself from Ponzi Schemes
It is crucial for crypto investors to remain vigilant and protect themselves from Ponzi schemes and fraudulent investment opportunities. Here are some key steps you can take:
- Research: Always conduct thorough research on any investment opportunity before committing your funds. Look for information about the company or individuals behind the investment, their track record, and any regulatory actions against them.
- Verify: Verify the credentials of any individual or company offering investment opportunities. Check if they are registered with relevant regulatory bodies and if they have a history of compliance with regulations.
- Be Skeptical: Be skeptical of investment opportunities that promise high returns with little to no risk. If an investment opportunity sounds too good to be true, it probably is.
- Seek Professional Advice: Consider consulting a financial advisor or attorney before making any significant investment decisions. They can provide valuable guidance and help you navigate potential risks.
- Report Suspicious Activity: If you come across a suspicious investment opportunity or believe you have been a victim of fraud, report it to the appropriate regulatory authorities, such as the SEC or local law enforcement.
By following these steps, you can significantly reduce the risk of falling victim to Ponzi schemes and fraudulent investment schemes in the crypto space.
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