As cryptocurrency trading becomes more popular, the number of cryptocurrency scams is also increasing. Cryptocurrency users who are new to the cryptocurrency industry or are looking for shortcuts have become victims of cryptocurrency Ponzi schemes, pig killings and other frauds.
One example is the former Kansas bank CEO who was sentenced to 24 years in prison for losing millions of dollars in a pig slaughter scam. What’s more, he stole the money from the bank. Now, the SEC has charged two brothers with embezzling $60 million in a Ponzi scheme involving fake cryptocurrency robots.
80 people defrauded of $60 million in cryptocurrency Ponzi scheme
According to SEC documents, two brothers, Jonathan Adam and Tanner Adam, who operated GCZ Global LLC and Triten Financia Group LLC, have been charged with a $60 million crypto Ponzi scheme that affected approximately 80 people.
Jonathan, who was convicted three times of securities fraud, falsified his background to gain the trust of investors. As a result, he and his brother were indicted on August 26 in the U.S. District Court for the Northern District of Georgia for fraud.
The cryptocurrency scam lasted for more than a year, from January 2023 to June 2024. Janathan and Tanner deceived 80 cryptocurrency investors with promises of a monthly return of 13.5%. The scammers falsely claimed that they had developed an automated cryptocurrency trading robot to identify arbitrage trading opportunities.
In addition, they claimed to use investors’ funds as a lending pool through smart contracts and to provide funds for flash loans to finance arbitrage transactions. However, according to the SEC’s investigation, such a pool did not exist and users’ funds were used for personal gain.
As we alleged, the Adam brothers promised their investors high returns on non-existent crypto investments and then used investors’ funds to make Ponzi-style payments and purchase designer goods, recreational vehicles, and multi-million dollar homes,” said Justin C. Jeffries, Associate Director of Enforcement at the SEC’s Atlanta Regional Office.
Crypto Ponzi scheme used money to buy cars and apartments
The Adam brothers assured investors that their investments were safe. They promised to immediately lock the funds in a smart contract that no one could access. However, this was not the case.
The two successfully raised $61.5 million worth of investor funds. Of this, $53.9 million was used for personal gains and interest, brokerage fees, and even the return of principal. However, the indictment alleges that they built a $30 million condo in Miami, another $1.8 million was used to build a house in Texas, and $480,000 was used to purchase cars, trucks, and other recreational vehicles.
The apartment and Texas family home were owned by Tanner Adam. However, $480,000 was used by Jonathan Adam to purchase luxury cars and vehicles. In addition, the SEC revealed that only $400,000 worth of investor funds remained in the official account, while the rest was diverted for various personal purposes.
Officials are actively involved in cryptocurrency regulation, with the U.S. Securities and Exchange Commission recently cracking down on Abra’s unregistered cryptocurrency offering. Investors, fearing they will lose their hard-earned money, are demanding stricter rules and regulations.
Final Thoughts
As the number of cryptocurrency Ponzi schemes continues to rise, another $60 million embezzlement case has attracted attention. The U.S. Securities and Exchange Commission has charged two brothers with robbing 80 cryptocurrency investors. The scammers promised a 13.5% return on investment and that the funds would be safe until the end of the contract period. They lured cryptocurrency investors with fake automated cryptocurrency robots and started a pool of funds to provide loans to arbitrage traders.
