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SEC Charges 17 Individuals in $300 Million Ponzi Scheme Disguised as Crypto Trading Platform CryptoFX

Ruholamin Haqshanas
Last updated: | 2 min read
SEC Charges 17 Individuals in $300 Million Ponzi Scheme

The US Securities and Exchange Commission (SEC) has taken legal action against 17 individuals involved in an alleged $300 million Ponzi scheme operating under the name CryptoFX, a cryptocurrency trading platform. 

The SEC’s charges shed light on a fraudulent operation that targeted Latino investors, promising them financial prosperity and guaranteed returns through crypto and foreign exchange investments.

CryptoFX was officially registered as a crypto trading platform in Houston in February 2020. 

However, suspicions surrounding its activities led the SEC to file an emergency action in September 2022, seeking to halt the platform’s operations. 

Nearly 18 months later, on March 14, the SEC identified and charged 17 individuals believed to be the masterminds behind the Ponzi scheme.

CryptoFX Exploited Latino Investors

According to Gurbir S. Grewal, director of the SEC’s Division of Enforcement, CryptoFX exploited Latino investors, offering them the illusion of risk-free investments in cryptocurrencies and non-fungible tokens (NFTs) that would purportedly lead to life-changing wealth.

The scheme specifically targeted crypto investors within the Latino community across multiple U.S. states and two foreign countries.

The SEC’s investigation revealed that the individuals associated with CryptoFX misused investors’ funds, diverting them for personal gain instead of making legitimate investments in cryptocurrencies and NFTs. 

The allure of the booming crypto market during the time 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 is seeking not only the disgorgement or return of the misappropriated funds but also civil penalties for the individuals’ misconduct.

In a separate development, the SEC recently announced a postponement in its decision regarding the approval of options trading on spot Bitcoin exchange-traded funds (ETFs). 

The agency’s deferral grants an additional 45 days, up until April 24, to finalize its decision on the matter, which holds significant implications for the crypto industry and institutional adoption of Bitcoin.

SEC Files Multiple Charges Against Crypto Platforms 

Over the past year, the SEC has filed numerous lawsuits against crypto firms, with SEC Chair Gary Gensler consistently asserting that most cryptocurrencies should be classified as securities.

For one, the agency initiated a civil case against Sam Bankman-Fried, co-founder of FTX. 

In addition to the case against Bankman-Fried, the SEC filed lawsuits against other major crypto players, including Binance, its CEO Changpeng Zhao, and Coinbase.

More recently, a federal judge ruled that the SEC’s lawsuit against crypto firms Gemini and Genesis will proceed in court. 

The judge’s decision comes after Gemini and Genesis attempted to have the lawsuit, which alleges the sale of unregistered securities through the Gemini Earn program dismissed.