Blockchain

SEC: Scammers Promised Funds Worth ‘Trillions’

Federal authorities say scammers stole millions of dollars by promising investors access to a blockchain worth trillions.

According to the Securities and Exchange Commission (SEC), a group of people and companies carried out the $45 million fraud, telling investors they could reap substantial returns by investing in a blockchain technology known as CoinDeal that would be sold for trillions of dollars to a group of wealthy buyers.

“We allege the defendants falsely claimed access to valuable blockchain technology and that the imminent sale of the technology would generate investment returns of more than 500,000 times for investors,” Daniel Gregus, director of the SEC’s Chicago Regional Office, said in a Wednesday (Jan. 4) news release. “As alleged in our complaint, in reality this was all just an elaborate scheme where the defendants enriched themselves while defrauding tens of thousands of retail investors.”

The SEC said in the release that the sale of CoinDeal never occurred, and investors never received any money. The commission alleged the defendants misappropriated millions in investor money for personal use, with defendant Neil Chandran purchasing cars, real estate and a boat.

According to the SEC complaint, Chandran had already been indicted by the Department of Justice (DOJ) for wire fraud and money laundering in connection with the CoinDeal scheme.

Also named in the SEC complaint were Garry Davidson, Michael Glaspie, Amy Mossel, Linda Knott, and their associated businesses, all charged with violating the Securities Act and the Exchange Act, according to the release.

Last year, PYMNTS reported on a rise in the number of crypto-related scams in the wake of a report by the Consumer Financial Protection Bureau (CFPB).

“Our analysis of consumer complaints suggests that bad actors are leveraging crypto-assets to perpetrate fraud on the public,” said CFPB Director Rohit Chopra. “Americans are also reporting transaction problems, frozen accounts, and lost savings when it comes to crypto-assets. People should be wary of anyone seeking upfront payment in crypto-assets, since this may be a scam.”

Between October 2018 and September 2022, the bureau received over 8,300 complaints connected to crypto-assets, most of them in during 2021 and 2022. In about 40% of complaints related to crypto-asset handled since 2018, consumers reported that frauds and scams were the main issues.

“Hacks by malicious actors have marred crypto-assets and led to significant financial loss by consumers with no recourse for recovering stolen funds,” the CFPB said.

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