SEC Charges 4 People in $295 Million Crypto Ponzi Scheme

Blockchain skeptics and critics often deride cryptocurrency as a whole one big pyramid scheme. And although that point may have some room for debatethe Securities and Exchange Commission officially adds at least one more crypto venture ever-growing list of “definitely a scam” operations.

SEC announced charges against four people in connection with a fake crypto-themed Ponzi scheme called “Trade Coin Club,” Friday. Douver Torres Braga, Joff Paradise, Keleionalani Akana Taylor and Jonathan Tetreault face civil fines, along with other penalties, in Seattle’s U.S. District Court.

Trade Coin Club, which was founded by Braga, ran from 2016 to 2018 as a multi-level marketing program. And at that time, records show the scheme defrauded more than 100,000 people out of 82,000 bitcoins — then worth about $295 million, according to The SEC Complaint.

Braga and his crew of promoters allegedly lured investors in with claims that their money would be managed by a financial robot that made “millions of microtransactions” per second. And thanks to the magical (read: non-existent) fine, those same brands were told they would get a minimum 0.35% return on their investment every day, the commission said. But instead of depositing raised funds into a crypto investment account powered by a lightning-fast trading AI, the SEC alleges that Braga and co. pocketed it instead.

Furthermore, in classic Ponzi style, the money that a subset of investors were able to withdraw allegedly came from other investor contributions – not from any crypto trading activity.

“We allege that Braga used Trade Coin Club to steal hundreds of millions from investors worldwide and enrich himself by exploiting their interest in investing in digital assets,” said David Hirsch, head of the commission’s cryptoassets and cyber enforcement unit.

In total, the SEC alleges Braga walked away with $55 million in crypto, while Paradise received $1.4 million, Taylor received $2.6 million and Tetreault received $625,000. If the defendants are found liable in the case, they must return these funds as well as pay large civil penalties. And they will be barred from ever participating in another multi-level marketing venture or crypto investment.

The alleged Trade Coin Club scam is far from the first Ponzi scheme to appear in the cryptoverse in recent years. In fact, it’s so common that outlets covering blockchain have explainer articles to help readers try to recognize and avoid the arrangements.

Back in August, the SEC filed another set of charges against 11 people accused of stealing $300 million in a similar fraudulent scheme. And between January 2021 and April 2022, the Federal Trade Commission reported that Americans have lost over $1 billion to crypto-related scams.

So remember: if it sounds too good to be true, it likely is. And often a Trade Coin Club can become a betrayed coin club.