Seventeen Charged By SEC in Cryptocurrency Ponzi Scheme (Florida Investors Affected)

On March 14th, 2024, the Securities and Exchange Commission (SEC) announced securities fraud charges in a massive—$300 million—Ponzi scheme case. The primary company involved in the alleged fraud scheme—CryptoFX LLC of Houston, TX—is accused of targeting investors from the Latino community. In total, the SEC estimates that 40,000 investors have been affected, including many people from Florida. Seventeen individual defendants were also charged, including Juan Puac of Port Saint Lucie, FL. Here, our Miami Ponzi scheme attorney discusses the charges in more detail.

An Overview of the Alleged CryptoFX LLC Ponzi Scheme 

As alleged by the SEC in its federal securities fraud complaint, CryptoFX LLC was presented as a crypto trading platform that promised investors substantial returns on their capital in cryptocurrencies and certain foreign exchange instruments. Notably, CryptoFX LLC touted the investment products in question as “risk-free” and “guaranteed” to make a return. However, the SEC’s findings suggest that the operation was a classic Ponzi scheme—meaning incoming funds from new investors were used to pay supposed (fake) returns of earlier investors. Here is an overview of some key details from this securities fraud scheme:

• The Time Frame: Investors were allegedly defrauded between May 2020 to October 2022. Though, investors may have been defrauded in other periods as well.
• Promised Returns: Investors were lured with promises of 15 to 100 percent returns through crypto asset and foreign exchange trading. The returns were touted as being extremely safe—both “risk free” and “guaranteed.”
• Misuse of Funds: Rather than investing the funds as promised, the operators of the scheme are alleged to have used new investor money to pay returns to existing investors, and for personal gains, including funding their lavish lifestyles.

Understanding the Basic Mechanics of a Ponzi Scheme 

Ponzi schemes are among the most common types of large-scale investment fraud schemes. Indeed, many seven, eight, and nine figure investment fraud schemes involve at least some “Ponzi-like” element. Broadly speaking, a Ponzi scheme is a type of financial fraud that lures investors with the promise of high returns with little to no risk. The basic mechanism involves paying returns to earlier investors using the capital contributed by newer investors, rather than from profit earned by the operation of a legitimate business. Of course, the structure is inherently unsustainable because it relies on a continuous influx of new investments to fund returns. Once the flow of new investors slows down or stops, the scheme collapses because the returns can no longer be paid out, leading to losses for most, if not all, investors involved.

Contact Us Today for Help With a Ponzi Scheme Investment Fraud Claim

At ​Carlson & Associates, P.A., we are committed to protecting the rights and the interests of investors. If you suffered losses in a Ponzi scheme, our attorneys are here to help. Contact us today to set up your confidential, no obligation initial consultation. From our legal office in Miami, we represent investors in Ponzi scheme claims throughout South Florida.

Source:

sec.gov/news/press-release/2024-35