The U.S. Securities and Exchange Commission has charged four people with fraud over their roles in a digital asset Ponzi scheme that raised $295 million from over 100,000 investors. Known as Trade Coin Club, the scheme operated between 2016 and 2018, according to the SEC complaint filed in the Western District of Washington.
The SEC charged Joff Paradise, Douver Torres Braga, Keleionalani Akana Taylor, and Jonathan Tetreault with fraud and securities laws violations.
According to the complaint, Braga, a 45-year-old who once resided in Florida but is now based in Brazil, founded Trade Coin Club in 2016. The multi-level marketing (MLM) program claimed it employed a trading bot that would generate at least 0.35% in daily profits for investors.
Braga partnered with Paradise, a 60-year-old who used to reside in Nevada but is now based in Panama, to recruit a wide network of recruiters. This included Taylor, a Hawaii resident, and Massachusetts-based Tetreault, both of whom were charged alongside the founders.
While the trading bot was the company’s main feature, the four also relied on recruiting new investors through a lucrative commission program. Any existing member who brought in a recruit earned a commission based on their initial investment.
With Trade Coin Club operating at a time when billions were flowing into the industry at the height of the ICO mania, it grew aggressively in a few months. By 2017, the founders had brought in over 82,000 BTC, back then valued at over $295 million. The scheme managed to lure at least 100,000 investors from around the world, at least 2,500 of whom were based in the United States.
However, as the SEC reveals, the profits purportedly generated by the trading bot were just the founders paying off people through funds invested by late-stage investors. By September 2017, the withdrawals exceeded the deposits, and the scheme started to unravel.
While investors lost hundreds of millions of dollars to the scheme, the four founders were enriching themselves, the SEC found. Braga made the most, netting at least $55 million in BTC. Taylor made $2.6 million, Paradise received BTC worth $1.4 million, while Tetreault received $625,000.
“We allege that Braga used Trade Coin Club to steal hundreds of millions from investors around the world and enrich himself by exploiting their interest in investing in digital assets,” commented David Hirsch, Chief of the Enforcement Division’s Crypto Assets and Cyber Unit. The unit was renamed earlier this year and doubled its headcount to ensure the SEC can crack down on digital asset scammers.
“To ensure our markets are fair and safe, we will continue to use blockchain tracing and analytical tools to aid us in the pursuit of individuals who perpetrate securities fraud,” Hirsch added.
The SEC is seeking injunctive relief, civil penalties, and disgorgement. Tetreault has already agreed to settle the charges with the regulator without denying or admitting the allegations.
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