The SEC – too

The last few years have been marked by the proliferation of fundraisers for projects around cryptocurrencies. The most striking example is that of ICOs hastily mounted on controversial projects that ended in failure. We recently saw the SEC end projects because tokens sold at ICOs were not registered as securities. This time around, the regulator looked into scams linked to cryptocurrencies through MLM (or Marketing Multi Level, whose participants are encouraged to sponsor new members). This is how she recently brought a lawsuit against the Modern Money Team (MMT) for fraud and deception of investors.

A potential $ 12 million scam

Basically, the MMT at raised funds to finance cryptocurrency mining which she claimed to make herself with her own equipment. The profits from this activity should allow him to pay interest to investors at the end of each month.

Many American nationals and other nationalities were thus brought to pay the sum of $ 50 for mining financing contracts over a period of two years. As for those of them who preferred to opt to finance the activity under a lifetime contract, they had to pay $ 2,000.

The operation thus brought together no less than 3.5 million from 200 investors to support cryptocurrency mining. Very quickly, the promoters were in inability to honor monthly interest payments after falling value of mined cryptocurrencies. In order to keep the program alive, they therefore thought of adding an MLM system to it. In doing so, a total of 1,800 investors bought packs worth between $ 20 and $ 500. While half of the pack funds were funding commercial activities, the other was used to pay MLM commissions. The Ponzi scheme thus created made it possible to collect up to $ 12 million.

Embezzlement and cessation of payment

After investigation, the SEC decided to freeze the assets of three individuals who are linked to the management of funds raised by MMT. It is Daniel F. Putnam, Jean Paul Ramirez Rico, and Angel A. Rodriguez. These have indeed used much of the investors’ funds for personal gain. Mr. Putnam for example, spent nearly $ 150,000 on a luxury apartment with spa.

Mr. Ramirez who was responsible for the funds collected in the MLM, invested in return a part in an account BitFinex. But in November 2019, payments to investors abruptly stopped. To justify the situation, he claimed that BitFinex had frozen the account and had to end all activity on it. From that moment, investors no longer received any payment from the MLM industry, which nevertheless continued to take deposits until the beginning of March 2020.

While the SEC’s investigation into the use of MMT’s investor funds is still ongoing, it has clearly exposed the bad faith of its leaders. This case shows once again all the mistrust that must be had with regard to crypto projects that are mixed up with MLM.


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