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.
- What Does Binance Being Kicked Out of Belgium Mean for Crypto Prices?
- Crypto Traders and Coin Prices Face New Challenge as Binance Gives up its FCA Licence
- Interpol Declares Investment Scams “Serious and Imminent Threat”
- Annual UK Fraud Audit Reveals Scam Hot-Spots
- Former Schwab, Wells Fargo, and Morgan Stanley Advisor is Sentenced to Seven Years
- FX Fraudster On The Run After £70m Ponzi Scheme Collapses
What Does Binance Being Kicked Out of Belgium Mean for Crypto Prices?
Safest Forex Brokers 2023
|Broker||Info||Best In||Customer Satisfaction Score|
|#1||72% of retail CFD accounts lose money. Founded: 2014||Global Forex & CFD Broker||
Best Trading Conditions Visit broker
|#2||Your capital is at risk Founded: 2014||Global Forex Broker||
BEST SPREADS Visit broker
|#3||Your capital is at risk Founded: 2006||Globally regulated broker||
BEST CUSTOMER SUPPORT Visit broker
|#4||82% 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||
Best Trading App Visit broker
|#5||Between 74-89 % of retail investor accounts lose money when trading CFDs Founded: 2010||Global Forex Broker|
|#6||76% of CFD traders lose money Founded: 2007||Global CFD & FX Broker||
ALL-INCLUSIVE TRADING PLATFORM Visit broker
|#7||Your capital is at risk Founded: 2009, 2015 and 2017||Global Forex Broker|
|#8||Your capital is at risk Founded: 2006||CFD and Cryptocurrency Broker||
CFD and Cryptocurrency Visit broker
Forex Fraud Certified Brokers
Stay up to date with the latest Forex scam alerts
Sign up to receive our up-to-date broker reviews, new fraud warnings and special offers direct to your inbox