The United States Securities and Exchange Commission (SEC) has charged 17 individuals with orchestrating a $300 million Ponzi scheme under the guise of crypto trading platform CryptoFX.
CryptoFX was registered as a crypto trading platform in Houston in February 2020. In September 2022, the SEC filed an emergency action to halt all operations of CryptoFX, suspecting it of being an ongoing crypto-asset Ponzi scheme. About 18 months later, on March 14, the SEC identified 17 individuals allegedly involved in the scheme.
In the words of Gurbir S. Grewal, director of the SEC’s Division of Enforcement:
“We allege that CryptoFX was a $300 million Ponzi scheme that targeted Latino investors with promises of financial freedom and life-altering wealth from ‘risk free’ and ‘guaranteed’ crypto and foreign exchange instruments.”
According to the SEC, CryptoFX allegedly targeted crypto investors from the Latino community across 10 U.S. states and two foreign countries. Grewal said that a Ponzi scheme of such a large magnitude requires many participants, and the SEC charged the principal architects and the perpetrators.
The SEC found several individuals linked to CryptoFX misappropriated investors’ funds by falsely promising investments into potentially lucrative cryptocurrencies and nonfungible tokens (NFTs). At the time, investors were lured in by the ongoing crypto bull market.
The SEC requested that the court charge the individuals for violating various sections of the Securities and Exchange Act. In addition, the SEC wants the 17 individuals to “disgorge” or return the funds and additionally pay civil penalties for the violations.
Related: Senators pressure SEC’s Gensler not to approve any more crypto ETFs
On March 6, the SEC publicly postponed its decision on whether to approve options trading on spot Bitcoin (BTC) exchange-traded funds (ETFs).
Its deferral gives the agency another 45 days — its maximum under the law is 90 days — to come to a final decision, which is April 24.
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