The growing popularity of cryptocurrency and its underlying blockchain technology has given room for numerous scam initiatives globally. Unsuspecting customers are lured to these ventures with promises of huge returns on investments and quick money. Owing to greed, some customers go as far as investing lifetime savings in search of profits.
The latest situation involves two brothers recently charged by the United States Securities and Exchange Commission for parading a Ponzi scheme, deceiving investors into putting their money and then using the funds for personal benefits. Here is how it happened.
Over $61 Million Stolen From 80 Investors
In a recent filing to a United States District Court for the Nothern District of Georgia, the SEC accused two brothers, Jonathan Adam, and Tanner Adam, of fraudulently raising $61.5 million from 80 investors. According to the filing, the brothers offered investors the opportunity to take part in a crypto asset lending pool.
The brothers lied that they had created an automated trading bot that identifies and enters into smart contracts that provide “flash loans” to arbitrage traders on several trading platforms. Jonathan and Tanner promised investors a 13.5% return on investment monthly, adding that the profits were raised from the fees earned from the total amount of capital made available through the flash loans on popular crypto trading platforms like Gemini.
“The Adam brothers told investors that their funds will be immediately locked in a bot for deployment into the lending pool such that nobody, the Adam brothers included, could access the money until the agreed-upon length of the promissory note or investment contract had passed, the SEC stated in the filing.”
However, this turned out to be false as the brothers used the funds for personal expenses including “designer goods, recreational vehicles, and million-dollar homes.”
The Defendants Lavished Investors Funds
With the promise of unreal profits to their investors, the duo was able to secure sizeable monies from investors and most of it was used to fund their lifestyle. Per the filing, the SEC alleges that $53.9 million was spent on interest payments, finders’ fees, and even principal repayments for personal benefit.
On the other hand, the commission claims that a $30 million condominium was built in Miami, a residence in Texas was built for another $1.8 million, and $480,000 was spent on automobiles, trucks, and other recreational vehicles. Furthermore, the SEC disclosed that less than $400,000 of the investors’ money remains in the official accounts that are still being controlled by the brothers.
The SEC’s tight scrutiny of the crypto industry underscores its effort to make sure that the crypto community is safe for investors, including newcomers and experienced investors. Interestingly, this comes shortly after the Abra crypto management platform was charged by the security watchdog for violating securities laws and operating as an unregistered investment company.
Victor Swaezy
Victor Swaezy is a crypto-journalist with more than 3 years of experience in covering blockchain technology and digital currencies news. Known for his comprehensive reporting, Victor has contributed to leading industry publications, providing market participants with the required knowledge to make informed decisions. When he is not working, he loves to watch movies and have a good time.