Federal Court at Request of FTC Stops Activities of Individuals Who Allegedly Promoted Deceptive Cryptocurrency-Based Money-Making Schemes
On March 16, 2018, the FTC announced that at its request, a federal court halted the activities of four individuals who allegedly promoted deceptive money-making schemes involving cryptocurrencies, which falsely promised that participants could earn large returns by paying cryptocurrency such as Bitcoin or Litecoin to enroll in the schemes.
In a complaint, the FTC alleges that three defendants – Thomas Dluca, Louis Gatto, and Eric Pinkston – promoted chain referral schemes known as Bitcoin Funding Team and My7Network. Using websites, YouTube videos, social media and conference calls, the defendants promised big rewards for a small payment of Bitcoin or Litecoin.
The defendants claimed that Bitcoin Funding Team could turn a payment of the equivalent of just over $100 into $80,000 in monthly income. The FTC alleges, however, that the structure of the schemes ensured that few would benefit. In fact, the majority of participants would fail to recoup their initial investments.
Bitcoin Funding Team and My7Network participants, according to the FTC, only could generate revenue by recruiting new participants and convincing them to also pay cryptocurrency. For example, Bitcoin Funding Team participants were required to make an initial bitcoin payment to an earlier participant and pay a fee to Bitcoin Funding Team. With these payments, participants were eligible to recruit new members and receive payments from them. Promoters claimed participants could earn bigger rewards if they paid additional bitcoins.
The FTC alleges that a fourth defendant, Scott Chandler, promoted Bitcoin Funding Team and another deceptive cryptocurrency scheme, Jetcoin. Jetcoin also promoted a recruitment scheme and, additionally, promised investors a fixed rate of return on their initial Bitcoin investments as a result of Bitcoin trading. In a series of promotional calls, Chandler claimed Jetcoin participants could double their investment in 50 days. In reality, the FTC complaint alleges, the scheme failed to deliver on these claims and ceased operation within two months of launching.
The FTC charged in its complaint that the defendants violated the FTC Act’s prohibition against 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 three schemes. As requested by the FTC, the court has issued a temporary restraining order and frozen the defendants’ assets pending trial.
FTC Cautions Digital Currency Investors
Before you invest in cryptocurrency, BE ADVISED:
- Cryptocurrencies ARE NOT backed by a government or central bank. Unlike most traditional currencies, such as the dollar or yen, the value of a cryptocurrency is not tied to promises by a government or a central bank.
- If you store your cryptocurrency online, you DO NOT have the same protections as a bank account. Holdings in online “wallets” are not insured by the government like U.S. bank deposits are.
- A cryptocurrency’s value can change constantly and dramatically.An investment that may be worth thousands of dollars on Tuesday could be worth only hundreds on Wednesday. If the value goes down, there’s no guarantee it will rise again.
- Nothing about cryptocurrencies makes them a foolproof investment. Just like with any investment opportunity, there are no guarantees.
- NO ONE can guarantee you’ll make money off your investment. Anyone who promises you a guaranteed return or profit is likely scamming you. Just because the cryptocurrency is well-known or has celebrities endorsing it DOES NOT mean it’s a good investment.
- Not all cryptocurrencies or the companies behind them are the same.Before you decide to invest in a cryptocurrency, look into the claims the company is making. Conduct an Internet search with the name of the company and the cryptocurrency with words like review, scam, or complaint. Look through several pages of search results.
Source: FTC.gov
Kehoe Law Firm, P.C.