SEC Charges Brothers in $60 Million Crypto Ponzi Scheme

On Monday, the U.S. Securities and Exchange Commission (SEC) charged two brothers, Jonathan Adam of Angleton, Texas, and Tanner Adam of Miami, Florida, with allegedly defrauding over 80 investors in a $60 million cryptocurrency Ponzi scheme. The SEC secured emergency asset freezes against the brothers and their companies, GCZ Global LLC and Triten Financial Group LLC, to prevent further dissipation of assets.

🧵GARY GENSLER-LED SEC CHARGES BROTHERS WITH $60M CRYPTO-RELATED PONZI SCHEME!!!!!!!!!!!!!!!!!!!!

THE U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) HAS FILED CHARGES AGAINST BROTHERS JONATHAN AND TANNER ADAM, ALONG WITH THEIR COMPANIES, FOR ALLEGEDLY OPERATING A $60 MILLION… pic.twitter.com/uBXYZK2RJW

— cryptobuffett (@celmcrypto) August 28, 2024

The SEC filed its complaint in the U.S. Northern District Court of Georgia, accusing the Adam brothers and their businesses of violating federal securities laws’ antifraud provisions. According to the SEC, the brothers promised investors 13.5% monthly returns from January 2023 to June 2024, claiming to use a cryptocurrency trading “bot” designed to exploit profitable arbitrage opportunities.

The SEC alleges that the Adams misled investors by saying their money would be placed in a lending pool to fund “flash loans” through smart contracts, a tactic pitched as a risk-free way to generate profits. Flash loans are a form of borrowing that requires no collateral, provided the loan is repaid within the same blockchain transaction. However, the SEC’s complaint reveals that this lending pool was entirely fabricated.

Investors were told that their funds would first be transferred to the cryptocurrency exchange Kraken, where the U.S. dollars would be converted into Tether’s stablecoin, USDT. The funds were then supposedly moved into a crypto wallet for use in a high-frequency trading lending pool. In reality, of the $61.5 million raised from investors, at least $53.9 million was either misappropriated or used to pay returns to earlier investors, finder’s fees, and interest, according to the SEC.

SEC Charges Brothers for $60 Million Ponzi Scheme Involving Cryptocurrency Arbitrage: The SEC has charged Jonathan and Tanner Adam for allegedly running a $60 million Ponzi scheme through a phony cryptocurrency arbitrage trading plan, impacting over 80… https://t.co/anM1Grsgxm pic.twitter.com/qvwRF0MXQR

— Token Trendy (@TokenTrendyCom) August 28, 2024

The complaint also details how the Adam brothers allegedly diverted millions of dollars to fund their extravagant lifestyles. Tanner Adam is accused of using investor funds to make installment payments on a $30 million condo in Miami. Meanwhile, Jonathan Adam reportedly spent at least $480,000 on luxury vehicles, including cars, trucks, and recreational vehicles. By June 2024, the brothers had depleted the investor funds to less than $400,000 in their bank accounts.

The SEC is seeking permanent injunctions against the Adams, the return of ill-gotten gains, and civil penalties to hold the brothers accountable for their actions and to prevent future misconduct.

Key Points:

i. The SEC charged Jonathan and Tanner Adam with defrauding investors in a $60 million cryptocurrency Ponzi scheme.

ii. The brothers allegedly promised 13.5% monthly returns using a fabricated cryptocurrency trading “bot.”

iii. Of the $61.5 million raised, $53.9 million was misappropriated or used to pay returns to earlier investors and cover expenses.

iv. The Adams reportedly used investor funds to support lavish lifestyles, including payments on a $30 million condo and luxury vehicles.

v. The SEC seeks permanent injunctions, the return of profits, and civil penalties against the brothers.

Lap Fu Ip – Reprinted with permission of Whatfinger News