Cryptocurrencies, especially Bitcoin, saw a major surge in value and popularity last year. Unfortunately, this also means that scams and ponzi schemes became more prevalent. In response to this, the Federal Trade Commission has stepped into the fray. The FTC has issued restraining orders and frozen the assets of three defendants who were part of the Bitcoin Funding Team and My7Network. The FTC’s report alleges that the three defendants “promised big rewards for a small payment of Bitcoin or Litecoin.”
According to the report, the organization functioned like any other ponzi scheme. The only way participants could make money was by recruiting new members, who would in turn pay in cryptocurrency. Participants in the program were required to pay both an earlier participant and the Bitcoin Funding Team. After paying these fees, users would then be allowed to recruit new members, would pay them in turn. The organization also told members that they would be eligible for additional rewards if they paid a higher amount.
In addition to Bitcoin Funding Team, one of the defendants, Scott Chandler, pitched an additional service called Jet-Coin. This platform featured a similar recruitment model to the Bitcoin Funding Team, and promised that users would receive a fixed return on their investment as a result of Bitcoin trading. In a series of promotional calls, Chandler promised that users could double their investments within 50 days.
One victim of Chandler’s scheme said that she joined Gladiacoin when they agreed to pay her 2.2 percent per day if she purchased Bitcoin packages. Chandler then moved on to Jet-Coin, which eventually shut down, leaving her $400 poorer.
It’s worth noting that the FTC would have targeted the Bitcoin Funding Team regardless of what currency was used, as the underlying ponzi scheme remains the same.
“This case shows that scammers always find new ways to market old schemes, which is why the FTC will remain vigilant regardless of the platform – or currency used,” Tom Pahl, Acting Director of the FTC’s Bureau of Consumer Protection told Tech Crunch. “The schemes the defendants promoted were designed to enrich those at the top at the expense of everyone else.”