The Securities and Exchange Commission (SEC) has charged Douver Torres Braga, Joff Paradise, Keleionalani Akana Taylor, and Jonathan Tetreault for their roles in crypto Ponzi scheme Trade Coin Club.
It raised more than 82,000 bitcoin, valued at $295m (£257m, €296m) at the time, from more than 100,000 investors worldwide.
According to the SEC’s complaint, Braga created and controlled Trade Coin Club, a multi-level marketing programme that operated from 2016 through 2018 and promised profits from the trading activities of a purported crypto asset trading bot.
The SEC alleges that Braga and Paradise “lured investors with false representations that the bot made millions of microtransactions every second, and that investors would receive minimum returns of 0.35% daily”.
However, instead of deploying investor funds for the purported trading bot, Braga allegedly “siphoned off investor funds for his own benefit and to pay a network of worldwide Trade Coin Club promoters, including Paradise, Taylor, and Tetreault”.
The US regulator further alleges that Trade Coin Club operated as a Ponzi scheme and that investor withdrawals came entirely from deposits made by investors, not from any crypto asset trading activity by a bot or otherwise.
The SEC complaint also said that Braga personally received at least 8,396 bitcoin of the sum invested (worth $55m at the time), Paradise received 238 bitcoin (worth more than $1.4m at the time), Taylor received 735 bitcoin (worth more than $2.6m at the time), and Tetreault received 158 bitcoin (worth more than $625,000 at the time).
‘Exploiting their interest’
David Hirsch, chief of the SEC enforcement division’s crypto assets and cyber unit, said: “We allege that Braga used Trade Coin Club to steal hundreds of millions from investors around the world and enrich himself by exploiting their interest in investing in digital assets.
“To ensure our markets are fair and safe, we will continue to use blockchain tracing and analytical tools to aid us in the pursuit of individuals who perpetrate securities fraud.”
The SEC’s complaint alleges that Braga violated the antifraud and securities registration provisions, Paradise violated the antifraud, securities registration, and broker-dealer registration provisions, and Taylor violated the securities and broker-dealer registration provisions of the federal securities laws.
The complaint seeks injunctive relief, disgorgement, and civil penalties.
The SEC filed a second complaint alleging that Tetreault violated the securities and broker-dealer registration provisions of the federal securities laws. Without admitting or denying the allegations, Tetreault agreed to settle the SEC’s charges.
The settlement is subject to court approval.
