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The SEC has filed a complaint with a Texas court regarding the alleged facilitators of a crypto Ponzi scheme.
The Securities and Exchange Commission (SEC) recently cracked down on a multimillion crypto Ponzi scheme targeting Latino investors. According to a regulatory filing released Monday, Texas-based crypto firm CryptoFX “used the attraction and novelty of crypto assets to solicit money from unsophisticated investors”. Furthermore, the SEC filing also alleges that the firm’s handlers Mauricio Chavez and Giorgio Benvenuto promised outrageous returns on investments.
According to the SEC, Chavez has been teaching paid classes despite a lack of experience or background in crypto investments. The co-operator of CryptoFX was allegedly conducting such dubious classes under the pretext of educating and empowering the Latino community. Each class reportedly cost between $500 and $1500 and claimed to help build wealth through crypto asset trading. However, the SEC alleges that the seminars, which have been taking place since 2020, were “merely conduits” for CryptoFX to fleece investors. While doing this, the crypto firm also maintained a referral system for recruiting new investors, the SEC states.
Meanwhile, Chavez also allegedly provided investors with false documents misinforming them about his ‘inflated’ crypto experience. In addition, the CryptoFX co-operator also claimed to have made over five millionaires within the past year, among other things. He also provided a table of potential earnings showing an impressive timescale for returns on investments.
Per a statement by the SEC regarding legal punitive actions on the alleged crypto Ponzi scheme:
“At the SEC’s request, the Court issued a temporary restraining order halting the offering, as well as temporary orders freezing assets and granting other emergency relief. After a hearing on September 29, 2022, the Court also granted the SEC’s motion for a receiver and extended the asset freeze.”
SEC Details How CryptoFX Operators Benefitted from Alleged Crypto Ponzi Scheme
Chavez and Benvenuto’s crypto company ultimately raised more than $12 million from over 5,000 investors, according to the SEC. However, the duo allegedly diverted this substantial capital instead of channeling the funds towards its stated crypto goal of profit-making. For instance, the SEC claims both men only used some funds to pay fake returns and appropriated the rest. The CryptoFX operators then plowed $8 million of investor money into a lavish lifestyle.
Specifically, Chavez indulged in cars, jewelry, and adult entertainment. Chavez also bought a house in his wife’s name, as well as acquired real estate that he controlled alongside Benvenuto. Meanwhile, Benvenuto allegedly solicited a large investor into the scheme and diverted investor funds to himself and CBT Group LLC with the aforementioned company owned by both Benvenuto and Chavez.
Owing to these allegations, the SEC’s complaint is charging Chavez, Benvenuto, and CryptoFX with a list of financial malpractices. These include “violating, or aiding and abetting violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder”. In addition, the complaint, which was filed in the US District Court for the Southern District of Texas, also charges Chavez, separately with a string of other listed violations.
Suggested Punitive Measures
The SEC is seeking “permanent injunctions, civil penalties, and disgorgement of ill-gotten gains” with prejudgment interest against Chavez, Benvenuto, and CryptoFX. Furthermore, the regulatory agency also wants the court to bar Chavez and Benvenuto from serving as officers or directors of any public company.