Crypto Ponzi Scheme Defrauded $295m in BTC. The SEC Charged Its Creator

The US Securities and Exchange Commission (SEC) has charged the creator and three promoters of Trade Coin Club for defrauding $295 million from more than 100,000 cryptocurrency traders worldwide. The company, identified as a Ponzi scheme, acquired more than 82,000 bitcoin (BTC) from investors.

According to the SEC press release from November 4, Douver Torres Braga, Joff Paradise, Keleionalani Akana Taylor, and Jonathan Tetreault were charged for their roles in the cryptocurrency Ponzi scheme. Braga, the creator of Tradie Coin Club, prepared a multi-level marketing (MLM) program and conducted it for two years (2016-2018).

Traders were supposed to reap profits through an automatic trading robot that carried out "millions of micro-transactions" every single second. The scammer promised traders daily returns of at least 0.35%. However, the money never made it to the market. It was used to cover Braga's personal expenses and to pay the Trade Coin Club's network of promoters, including the SEC-listed Paradise, Taylor and Tetreault.

"We allege that Braga used Trade Coin Club to steal hundreds of millions from investors around the world and enrich himself by exploiting their interest in investing in digital assets," David Hirsch, the Chief of the Enforcement Division's Crypto Assets and Cyber Unit, said.

"To ensure our markets are fair and safe, we will continue to use blockchain tracing and analytical tools to aid us in the pursuit of individuals who perpetrate securities fraud."

The SEC's complaint alleges that traders' money withdrawals were entirely covered by deposits made by later customers, not by the alleged trading revenues. Braga personally received approximately 8,396 BTC of the invested amounts (worth $55 million). Additionally, Taylor received 735 BTC, Paradise 238 BTC and Tetreault 158 BTC.

Braga, Paradise and Talor are accused of violating the antifraud and securities registration provisions. Tetreault heard similar charges but decided to settle with the SEC, without confirming or denying the allegations.

The SEC Wants to Better Protect Crypto Traders

The US financial market watchdog revealed in June, that he wants to work hand-in-hand with crypto platforms to register almost all crypto initial coin offerings (ICOs). Speaking before Congress, he admitted that consumers are not adequately protected from the risk of losing their funds in the cryptocurrency market, where nearly 8,000 tokens have been created.

As he added, tens of millions of American investors are now interested in the cryptocurrency ecosystem. However, they are exposed to high risks due to the speculative nature of the industry and heightened volatility.