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Crypto Ponzi Scheme Targets Local Latino Investors
By Jorge Casuso
March 7, 2023 -- A consumer alert issued by the City Tuesday warns that Latino households in Santa Monica are being targeted by a crypto Ponzi scheme at the center of a federal enforcement action.
The City has received information that more than 30 local households "have paid significant amounts of cash" to agents of CryptoFX, LLC., the subject of a complaint filed last year by the U.S. Securities and Exchange Commission (SEC).
The complaint alleges that the business and its two principal players engaged in a multi-million-dollar securities fraud targeting Latino investors in several states, including California.
"Recent information suggests that representatives of CryptoFX are continuing to communicate with local residents, primarily through the WhatsApp chat service, and actively soliciting funds," City officials said.
According to City officials, the SEC complaint alleges the defendants held paid classes (at 'la academia') on how "to build wealth through crypto asset trading" that were "mere ploys to get people to give money to the defendants."
It also claims the defendants "lied about investment returns and guaranteed that investors would not bear any losses," then used the investment money "to pay fake returns to investors" and "for the defendants’ personal use."
"The defendants ultimately raised over $12 million from more than 5,000 investors," the SEC wrote in a press release issued on October 3.
According to the release, the U.S. District Court in Houston issued a temporary restraining order last September "halting the offering, as well as temporary orders freezing assets and granting other emergency relief."
It also "granted the SEC's motion for a receiver and extended the asset freeze."
The SEC alleges the defendant who founded the company "used more than 90 percent of investor funds to pay fake returns to investors, support his lifestyle, and purchase and develop real estate" controlled by both defendants.
In total, the SEC alleges that the defendants "made approximately $2.7 million in Ponzi payments while diverting almost $8 million for their own use."
This included nearly $1.5 million CryptoFX's founder "spent on cars, credit card payments, jewelry, adult entertainment, and a house in his wife's name."
City officials said that "due to concerns for their privacy, Santa Monica residents have reached out to the City through a local neighborhood advocate."
Below is a list of resources for residents:
California Department of Financial Protection and Innovation, a statewide agency that provides consumer protection in financial transactions, and regulates financial services, products, and professionals. You can file a complaint with the DFPI by clicking here.
The Santa Monica Police Department, in collaboration with Familias Latinas Unidas (“FLU”), is planning an outreach event addressing fraud prevention, in Spanish and English. The program will address common financial scams, detection and prevention of financial scams, and additional tools for consumers. To learn more about this event contact firstname.lastname@example.org.
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