Settlement agreed in US crypto recruitment scheme case

Denise Jacksone

Defendants in an unusual case of alleged crypto fraud in the US have settled with a major regulator.

The Federal Trade Commission announced on Thursday that several defendants in a recruitment-based alleged crypto scam have committed to never participating in such schemes again.

They have also been hit with requirements to repay hundreds of thousands of US dollars between them.

The case focuses on two brands, Bitcoin Funding Team and My7Network. It is believed that these were multi-level marketing schemes, whereby each person recruited to sell a product is then encouraged to recruit more and more people – and often requires new recruits to purchase goods and services up front, then sell them on.

According to the Federal Trade Commission, however, Bitcoin Funding Team and My7Network were in fact “a type of pyramid scheme”.

It is believed that the defendants took to social media websites and other online spaces to recruit participants.

One audacious claim said that investing a sum a little higher than $100 would lead to monthly earnings of $80,000.

In the end, however, very few of those who invested managed to get their cash back.

Four individuals have been punished as a result of the ruling.

Thomas Dluca has been ordered to pay the most, with his settlement amount coming to $453,932.

Scott Chandler will pay $31,000.

Eric Pinkston settled for $461,035, but the FTC said that he will only be required to pay $29,491 due to the position of his finances.

A fourth defendant, Louis Gatto, will be banned from participating in multi-level marketing schemes in the future, as will the other three defendants.

All four are also banned from lying about how much cash participants in any of their future business schemes might earn.

It is understood that the FTC’s decision and proposed order was unanimously approved by five votes to nil. The case was filed in the US District Court for the Southern District of Florida.

In a statement, the FTC outlined exactly how the alleged scam operated.

“Bitcoin Funding Team and My7Network were chain referral schemes—a type of pyramid scheme”, it said.

“These schemes depend on continual recruitment of new participants to generate revenue. A fourth defendant, Scott Chandler, promoted Bitcoin Funding Team and another deceptive cryptocurrency scheme, Jetcoin, which promised participants a fixed rate of return, but failed to deliver on these claims”, the FTC alleged.

It emphasised the technological nature of the alleged scam, which is common in cases of this sort.

“The defendants promoted the cryptocurrency programs through websites, YouTube videos, social media, and conference calls, claiming, for example, that Bitcoin Funding Team could turn a payment of the equivalent of just over $100 into $80,000 in monthly income.

“The FTC alleges, however, that the structure of the schemes ensured that few would benefit. In fact, most participants failed to recoup their initial investments”, it added.

The FTC is a major US government body which aims to create market conditions conducive to competition between businesses and to ensure that consumers are empowered.


Denise Jacksone

Latest news

Forex vs Crypto: What’s Better For Beginner Traders?
The crypto and forex markets are two of the world’s most popular among investors and traders. Read more
Three Great Technical Analysis Tools for Forex Trading
You don’t have to be very technical minded to make use of technical analysis in your forex trading. Read more

Safest Forex Brokers 2024

Broker Info Best In Customer Satisfaction Score
#1 73% of retail CFD accounts lose money. Founded: 2014 Global Forex & CFD Broker
Number One Broker
Best Trading Conditions Visit broker
4.9
#2 Blackbull LogoYour capital is at risk Founded: 2014 Global Forex Broker
Number One Broker
BEST SPREADS Visit broker
4.8
#3 AvaTrade LogoYour capital is at risk Founded: 2006 Globally regulated broker
Number One Broker
BEST CUSTOMER SUPPORT Visit broker
4.9
#4 plus500 logo 80 april 2024* 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money Founded: 2008 Global CFD Provider
Number One Broker
Best Trading App Visit broker
5
#5 Between 74-89 % of retail investor accounts lose money when trading CFDs Founded: 2010 Global Forex Broker
Number One Broker
Low minimum deposit Visit broker
4.9
#6 Forex Broker eToro Logo76% of CFD traders lose money Founded: 2007 Global CFD & FX Broker
Number One Broker
ALL-INCLUSIVE TRADING PLATFORM Visit broker
4.9
#7 XM LogoYour capital is at risk Founded: 2009, 2015 and 2017 Global Forex Broker
Number One Broker
Low minimum deposit Visit broker
5
#8 FxPro LogoYour capital is at risk Founded: 2006 CFD and Cryptocurrency Broker
Number One Broker
CFD and Cryptocurrency Visit broker

    Forex Fraud Certified Brokers

    AvaTrade logo
    FXTM Logo
    plus500 logo 80 april 2024
    FxPro logo
    eToro Logo
    XM Logo
    BlackBull Logo Small
    CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.