The U.S. Securities and Exchange Commission filed an enforcement action against numerous individuals for their involvement in a $300 million Ponzi scheme run by CryptoFX LLC, which allegedly targeted in excess of 40,000 mainly Latino investors here in the United States, as well as in two other countries. The SEC’s complaint follows its prior emergency action in September 2022 that effectively ceased the CryptoFX fraud and brought civil charges against its two key principals.
The SEC complaint contends that CryptoFX claimed to engage in trading in crypto asset and foreign exchange markets, but in truth and in fact was nothing more than a fraudulent Ponzi scheme. Specifically, the SEC alleges in its court papers that from around May 2020 up until October 2022, the individual defendants, hailing from several states around the nation, assumed leadership roles of the CryptoFX network and engaged in investor solicitations by representing that CryptoFX’s trading would produce returns of 15% to 100%.
In its enforcement action, the SEC further alleges that CryptoFX raised $300 million in investor funds but failed to use most of investor capital for the claimed purpose of trading. from investors but did not use most of the funds for its claimed trading purposes. Rather, the defendants are alleged to have utilized investor capital to pay claimed returns to other investors, and to pay themselves bonuses and commissions. In particular, the SEC further contends in its lawsuit that one of the named defendants, after the court’s orders entered in September 2022, nonetheless advised two investors to take-back their complaints made to the SEC so that they could recoup their investments, and another defendant is claimed to have told investors that the SEC lawsuit was simply a fake.
The SEC complaint, filed in federal district court in Texas, civilly charged several individual defendants with violations of the securities and registration and broker provisions of the federal securities laws. The SEC also brought charges against a defendant for violation of the whistleblower protection provisions. In typical fashion, the SEC has sought by way of relief, the following: permanent injunctions against future violations of the federal securities laws, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties against each defendant.
David Chase, Esq. is a SEC defense attorney and a former SEC Prosecutor. He represents those around the nation being investigated by the SEC in matters involving Ponzi schemes, insider trading, stock manipulation, and securities offering frauds. If you have just received a SEC subpoena, you may contact David toll-free at: 800-760-0912 or e-mail at: david@davidchaselaw.com and can visit the Firm’s website for more information about David’s background and the SEC investigative process at: www.davidchaselaw.com.
