The US Securities and Exchange Commission (SEC) has taken legal action against 17 individuals allegedly involved in a $300 million Ponzi scheme operating under the guise of CryptoFX, a cryptocurrency trading platform.
The SEC’s charges expose a fraudulent scheme that specifically targeted Latino investors, promising them financial prosperity and guaranteed returns through investments in cryptocurrencies and foreign exchange.
Although CryptoFX was officially registered as a cryptocurrency trading platform in Houston in February 2020, suspicions surrounding its operations prompted the SEC to file an emergency action in September 2022 to halt its activities.
Nearly 18 months later, on March 14, the SEC identified and charged 17 individuals believed to be the masterminds behind the Ponzi scheme.
According to Gurbir S. Grewal, director of the SEC’s Division of Enforcement, CryptoFX preyed on Latino investors by offering them the illusion of risk-free investments in cryptocurrencies and non-fungible tokens (NFTs) that purportedly promised life-changing wealth.
The scheme specifically targeted crypto investors within the Latino community across multiple US states and two foreign countries.
The SEC’s investigation revealed that individuals associated with CryptoFX misappropriated investors’ funds for personal gain instead of making legitimate investments in cryptocurrencies and NFTs. The allure of the booming crypto market further enticed investors to participate in the scheme.
In response, the SEC has filed charges against the principal architects and perpetrators of the Ponzi scheme, alleging violations of various sections of the Securities and Exchange Act. The regulatory body seeks not only the disgorgement or return of the misappropriated funds but also civil penalties for the individuals’ misconduct.
In a separate development, the SEC announced a 45-day extension until April 24 to finalize its decision on options trading on spot Bitcoin exchange-traded funds (ETFs), which holds significant implications for the crypto industry and institutional adoption of Bitcoin.
Over the past year, the SEC has filed numerous lawsuits against crypto firms, with SEC Chair Gary Gensler asserting that most cryptocurrencies should be classified as securities.
Among these cases, the agency initiated a civil case against Sam Bankman-Fried, co-founder of FTX, and filed lawsuits against major crypto players, including Binance, its CEO Changpeng Zhao, and Coinbase.
Recently, a federal judge ruled that the SEC’s lawsuit against crypto firms Gemini and Genesis will proceed in court after Gemini and Genesis attempted to have the lawsuit dismissed. The lawsuit alleges the sale of unregistered securities through the Gemini Earn program.