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SEC Charges Founder & Associates With Fraud For Allegedly Running A Nearly $200M Ponzi-like Crypto Investment Scheme
04/29/2025On April 22, 2025, the Securities and Exchange Commission filed a civil enforcement action in the United States District Court for the Eastern District of Virginia against an individual and several related parties, alleging a large-scale international securities fraud scheme involving crypto and Forex trading. The SEC’s complaint details a multi-faceted operation that allegedly misappropriated over $57 million from investors through the offer and sale of unregistered securities, while operating what the SEC characterizes as a Ponzi-like scheme.
Alleged Scheme Overview
According to the SEC, from January 2020 through October 2021, defendant controlled and operated a now-defunct entity that purported to be engaged in profitable crypto asset and foreign exchange trading. Investors allegedly were solicited to purchase “membership packages” with promises of high, low-risk returns derived from the company’s trading activities. The company defendant allegedly controlled also allegedly implemented a multi-level marketing structure, offering referral incentives to encourage existing members to recruit new investors.
The SEC alleges that, in reality, the company conducted little to no actual trading and instead used new investor funds to pay purported returns to earlier investors, thereby sustaining the appearance of a successful trading operation. The complaint further alleges that defendant misappropriated more than $57M for personal enrichment and to benefit family members and associates, including with the purchase of Lamborghinis, luxury goods, and real estate.
Remarking on the alleged scheme, SEC’s Chief of the new Cyber and Emerging Technologies Unit, Laura D’Allaird, said, defendant “used the guise of innovation to lure investors into lining his pockets with millions of dollars while leaving many victims empty-handed. In reality, his false claims of crypto industry expertise and a supposed AI-powered auto-trading platform were just masking an international securities fraud.”
Misrepresentations and Use of Investor Funds
The SEC’s complaint describes an alleged pattern of material misrepresentations to investors regarding the company’s trading operations, defendant’s expertise, and the status of investor funds. Investors allegedly were provided with online dashboards reflecting fictitious profits, and were encouraged to reinvest or recruit others based on these false representations. The SEC alleges that defendant and his associates knew, or were reckless in not knowing, that these statements were false and that the company’s operations were unsustainable absent a continuous influx of new investor funds.
Unregistered Securities Offerings
The SEC alleges that the “membership packages” sold to investors constituted investment contracts and thus securities under federal law. According to the SEC, the company did not file a registration statement for these offerings, nor did it qualify for an exemption. The SEC alleges that defendant and his associates offered and sold these unregistered securities to investors in the United States and abroad through general solicitations, including in-person events, social media, and online communications.
Claims and Relief Sought
The SEC’s complaint charges defendant with violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks a permanent injunction against future violations, an injunction barring defendant from participating in certain marketing and sales programs or in the issuance, purchase, offer, or sale of securities (except for personal accounts), disgorgement of ill-gotten gains with prejudgment interest, and civil monetary penalties.
Key Takeaways
- The SEC continues to focus enforcement efforts on allegedly fraudulent schemes involving crypto assets and unregistered securities offerings, particularly those employing multi-level marketing structures.
- Individuals and entities receiving funds or assets derived from investor fraud, even if not directly involved in the underlying scheme, may be subject to SEC actions for unjust enrichment as relief defendants.
- Companies and individuals engaged in the offer or sale of investment products involving pooled funds and promises of passive returns should carefully assess whether such offerings constitute securities and ensure compliance with registration requirements or applicable exemptions.
Ultimately, this action is remarkable for how ordinary it is. Under the previous administration, crypto enforcement often involved novel theories and unpredictable application of the securities laws. The current administration has disavowed that approach. Instead, the new administration has advocated for regulatory clarity and a renewed focus on fraud victims. This case falls within that framework. The fact that it involves an allegedly fake crypto exchange does not detract from the straightforward theories underpinning it. Firms and individuals should not assume that the SEC will not remain active simply because it has changed course. The need remains to maintain effective compliance practices and be alert to the risks associated with unregistered offerings and multi-level marketing structures in the investment context.
