FTC Cracks Down on Alleged Cryptocurrency Ponzi Schemes

The FTC announced that it obtained a federal court order to shut down the activities of four individuals for allegedly operating cryptocurrency Ponzi schemes involving Bitcoin, Litecoin, and Jetcoin.

According to the FTC’s complaint, since at least February 2017, the individuals promoted so-called “chain referral” scams involving digital currencies through YouTube videos, social media, and conference calls with false promises claiming that consumers could earn significant income by participating in their programs.   For example, one recorded call asserted that participants could turn the equivalent of around $100 in Bitcoin into $80,000 in a month.

The complaint alleges that the programs were structured as a continual chain of recruitment and recruitment-related payments.  To enroll in the programs, consumers were required to make an initial Bitcoin payment.  From there, they were encouraged to start generating revenue by finding new participants and convincing them to pay the entry fee and recruiting others to do the same.  However, rather than making riches as they hoped, the complaint alleges that most participants were not even able to recoup their initial investment.

The complaint charged that the individuals violated the FTC Act’s prohibition against unfair or deceptive acts by misrepresenting the chain referral schemes as bona fide money-making opportunities and by falsely claiming that participants could earn substantial income by participating in the programs.

As requested by the FTC, the U.S. District Court for the Southern District of Florida issued a temporary restraining order and froze the individuals’ assets pending trial.

The FTC’s complaint is available here.

The U.S. District Court for the Southern District of Florida’s order is available here.