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Bitcoin scam: U.S. financial watchdog files complaint

Published on November 07, 2022 by Pierre Belhache - 2 mins reading time
Individuals Cryptocurrency

The U.S. Securities and Exchange Commission (SEC) has announced that it has filed charges against 4 individuals in connection with a large-scale Bitcoin scam. Nearly 100,000 investors are believed to have fallen victim to the scam, to the tune of $295 million.

A Ponzi pyramid

The scam is said to have taken place between 2016 and 2018, a period during which the Bitcoin price soared from $1,000 to $20,000 between late 2016 and late 2017. Douver Torres Braga, founder of the company Trade Coin Club, along with 3 promoters, Jonathan Tetreault, Joff Paradise and Keleionalani Akana Taylor allegedly embezzled 82,000 Bitcoins, representing a total value of $295 million in 2018.

The Securities and Exchange Commission (SEC), the US financial watchdog, has denounced the scam as a Ponzi scheme, and has announced that it has brought charges against the 4 investors. This financial arrangement, which promises very attractive rates of return, consists in paying the first investors with the sums invested by the newcomers. As long as new investors keep coming in, the scheme holds together, but collapses as soon as they become scarce.

A purported cryptoasset trading bot

Trade Coin Club promised investors a minimum daily return of 0.35%, thanks to a cryptoasset trading bot. Every second, this so-called bot was supposed to engage in countless microtransactions, exploiting the volatility of cryptocurrencies to enable investors to make substantial profits.

In reality, the contributions of the 100,000 investors were not used to fund the trading bot, but were allegedly misappropriated by Douver Torres Braga, the founder of Trade Coin Club, for his own account, as well as to pay several promoters including Jonathan Tetreault, Joff Paradise and Keleionalani Akana Taylor. Braga is said to have collected a minimum of 8,396 bitcoins, or $55 million in 2018, while the other 3 people charged each collected between 158 and 735 bitcoins, or $0.6 and $2.6 million.

Other Ponzi pyramids have already been dismantled by the SEC in the cryptoasset sector. In August, 11 people were indicted by the US financial watchdog for embezzling a total of $300 million through a similar financial scheme. Last year, across all types of assets and investments, Ponzi schemes enabled crooks to embezzle $3.8 billion in the United States.