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SEC Charges 17 in Alleged Ponzi Scheme Involving CryptoFX

The Securities and Exchange Commission (SEC) has charged 17 individuals connected with Houston-based CryptoFX, alleging that they were involved in a Ponzi scheme.

These charges come about 18 months after the SEC filed an emergency action to halt the crypto-asset Ponzi scheme and then worked to identify the individuals who were allegedly involved, the agency said in a Thursday (March 14) press release.

“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,” Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said in the release. “In the end, the only thing that CryptoFX guaranteed was a trail of thousands upon thousands of victims stretching across 10 states and two foreign countries.”

The SEC’s complaint alleges that the 17 individuals charged Thursday were leaders of the CryptoFX network and solicited investors by promising that the organization’s trading in crypto assets and foreign exchange would deliver returns of 15% to 100%, according to the release.

The complaint alleges that they raised a total of $300 million but did not use most of the funds for trading, instead using it to pay “supposed returns” to other investments and to pay commissions and bonuses to themselves, the release said.

The SEC’s complaint also alleges that after a court issued orders to halt the scheme in September 2022, two defendants continued to solicit investments, one of those defendants told investors that they could recover their investments if they rescinded their complaints to the SEC, and another defendant told investors that the SEC lawsuit was fake, per the release.

The complaint filed Thursday charges six defendants with violating antifraud, securities-registration and broker-registration provisions of federal securities laws; 11 defendants with violating securities-registration and broker-registration provisions; and one defendant with violating whistleblower protection provisions, according to the release.

In an earlier action around an alleged Ponzi scheme, the SEC said in September that it took legal action against Matthew Motil, the host of “The Cash Flow King” podcast, for allegedly defrauding investors of $11 million.