SEC Alleges That Fake Crypto Firms Stole $14 Million From Would-Be Investors — Barrons.com
By Kenneth CorbinThe Securities and Exchange Commission has filed a complaint against a group of purported crypto exchanges and online investment clubs that the agency says were nothing more than a scam that defrauded victims out of $14 million.In a complaint seeking a jury trial that was filed in federal court in Colorado, the SEC identified four entities operating as investment clubs using WhatsApp chat groups. The clubs were purportedly run by experienced financial professionals offering investment advice.Their advice was to invest in three supposed crypto trading platforms that offered "security token offerings," which were described as initial public offerings of tokens representing stocks issued by legitimate companies. In reality, participants in the investment clubs who bought into the purported crypto offerings were just handing their money over to scammers, according to the SEC."This was an elaborate confidence scam through which investors' assets were never invested as defendants represented they would be but instead were misappropriated from the start," the SEC says in its complaint.The SEC doesn't name any individuals in its complaint but just specifies seven purported investment clubs and trading platforms as the defendants, none of which appears to have an active online presence. Court documents don't indicate that any of the defendants has retained a lawyer. One of the purported investment clubs, AI Investment Education, had been registered with the SEC as an investment advisory firm, but a phone number listed on a regulatory filing is out of service. That document didn't list any assets under management.The other purported investment clubs were AI Wealth, Lane Wealth, and Zenith Asset Tech Foundation. The purported crypto trading platforms were named Morocoin Tech, Berge Blockchain Technology, and Cirkor.The scammers promised that participants in the investment clubs would receive AI-generated investment tips. These tips then led them to fund accounts on the crypto platforms, which they falsely said had government licenses, according to the SEC.The commission says the scammers added to their fraudulent receipts by requiring victims who wanted to withdraw their money to pay fees in advance. No withdrawal requests were honored, according to the complaint. The SEC says the $14 million disappeared overseas "through a web of bank accounts and crypto asset wallets."Laura D'Allaird, chief of the SEC's Cyber and Emerging Technologies Unit, says the case highlights an "all-too-common" type of confidence scam targeting investors and resulting in "devastating consequences." A confidence scam is generally understood as a scheme in which the perpetrator gains the trust of the victims and convinces them to send money to the perpetrator."Our complaint alleges a multistep fraud that attracted victims with ads on social media, built victims' trust in group chats where fraudsters posed as financial professionals and promised profits from AI-generated investment tips, then convinced victims to put their money into fake crypto asset trading platforms where it was misappropriated," she says.This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.