Crypto Investment Scheme Promoters Halted By US District Court

FinTech, News, Regulation | March 19, 2018 By:

A US district court in Florida has frozen the assets of four individuals who allegedly promoted deceptive money-making schemes involving cryptocurrencies.

The Federal Trade Commission (FTC) said Friday that the federal court of Florida’s southern district has upheld the agency’s request for a temporary restraining order against Thomas Dluca, Louis Gatto, Eric Pinkston, and Scott Chandler. The defendants are allegedly associated in various capacities with chain referral schemes.

Three of the defendants – Dluca, Gatto and Pinkston – were accused of using YouTube, social media and other websites to convince people they could take $100 and turn it into $80,000 in monthly income through the “Bitcoin Funding Team” and “My7Network.” To enroll in the program, victims were required to make an initial bitcoin payment. From there, they were encouraged to start generating revenue by recruiting new participants and convincing them to pay the entry fee. Instead of raking in the bitcoin like they hoped, most participants weren’t even able to recoup their initial investment.

“This case shows that scammers always find new ways to market old schemes, which is why the FTC will remain vigilant regardless of the platform – or currency used,” said Tom Pahl, Acting Director of the FTC’s Bureau of Consumer Protection. “The schemes the defendants promoted were designed to enrich those at the top at the expense of everyone else.”

The fourth defendant, Chandler, promoted Bitcoin Funding Team and another deceptive cryptocurrency scheme, Jetcoin. Jetcoin participants were promised they could double their investment in 50 days. However, the scheme failed to deliver on these claims and ceased operation within two months of launching.

The FTC charged that the defendants violated the FTC Act’s prohibition against deceptive acts by misrepresenting the chain referral schemes as bonafide money-making opportunities and by falsely claiming that participants could earn substantial income by participating in the three schemes. According to the FTC, the assets of the four defendants have been frozen pending a formal trial.

Neil Chilson, FTC’s acting chief technologist, said he expects the FTC to take future enforcement action on cryptocurrency fraud and is watching for other new potential schemes.

“Because these developments broadly affect the FTC’s work across the agency, we have created an internal FTC Blockchain Working Group,” Chilson said. “We believe this working group is an important step to ensure the FTC can continue its missions to protect consumers and promote competition in light of cryptocurrency and blockchain developments.”