SEC busts CryptoFX for running $300M Ponzi scheme

The United States Securities and Exchange Commission (SEC) has taken legal action against 17 individuals allegedly involved in a $300 million Ponzi scheme operating under the guise of the crypto trading platform CryptoFX.

Initially registered as a crypto trading platform in Houston in February 2020, CryptoFX came under scrutiny when the SEC filed an emergency action in September 2022 to halt its operations, suspecting it to be a crypto-asset Ponzi scheme. Now, 18 months later, the SEC has identified and charged 17 individuals allegedly connected to the scheme.

Targeting Latino Investors:

The SEC alleges that CryptoFX specifically targeted investors from the Latino community across multiple U.S. states and two foreign countries. Gurbir Grewal, director of the SEC’s Division of Enforcement, emphasized that the scheme preyed on investors with promises of financial freedom and guaranteed returns from crypto and foreign exchange investments.

According to the SEC, individuals associated with CryptoFX deceived investors by falsely promising investments in lucrative cryptocurrencies and non-fungible tokens (NFTs). These promises were made during the crypto bull market, enticing investors with the prospect of significant returns.

Legal Action and Penalties:

The SEC has requested the court to charge the accused individuals with violating various sections of the Securities and Exchange Act. Additionally, the SEC seeks the return of misappropriated funds through disgorgement and the imposition of civil penalties.

Amidst its legal actions, the SEC recently postponed its decision on whether to approve options trading on spot Bitcoin exchange-traded funds (ETFs). The agency’s deferral extends the decision timeline by 45 days, with a final decision expected by April 24.