Government Shuts Down Cryptocurrency Pyramid Scammers
The Bitcoin boom has some people forgetting the old adage "if it sounds too good to be true, it probably is," and scammers are cashing in on that naiveté for their own gain.
The Federal Trade Commission on Friday announced it has shut down the operations of four individuals who allegedly ran get-rich-quick cryptocurrency schemes, promising victims large returns in exchange for a small payment of Bitcoin or Litecoin.
Three of the defendants -- Thomas Dluca, Louis Gatto, and Eric Pinkston -- allegedly operated pyramid schemes known as Bitcoin Funding Team and My7Network. Through their websites, YouTube videos, social media accounts and conference calls, the trio allegedly claimed they could turn the equivalent of around $100 into $80,000 in a month, the FTC said.
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, the FTC said.
"This case shows that scammers always find new ways to market old schemes," Tom Pahl, acting director of the FTC's Consumer Protection Bureau, said in a statement.
A fourth defendant, Scott Chandler, promoted Bitcoin Funding Team and another cryptocurrency pyramid scheme known as Jetcoin. During promotional calls, Chandler allegedly claimed Jetcoin participants could "double their investment in 50 days" through Bitcoin trading.
"In reality … the scheme failed to deliver on these claims and ceased operation within two months of launching," the FTC said.
The defendants violated the law "by misrepresenting the chain referral schemes as bona fide money-making opportunities and by falsely claiming that participants could earn substantial income by participating," the FTC said. At the agency's request, a federal court has issued a temporary restraining order and frozen the defendants' assets.