SEC, Justice Department Charge Man in $200M Crypto Fraud Scheme

The US Securities and Exchange Commission (SEC) and federal prosecutors have taken action against a man accused of orchestrating a crypto trading scheme that defrauded approximately 90,000 individuals out of $200 million. The scheme promised high returns from Bitcoin and forex trading.

The SEC filed charges against Ramil Palafox, a dual citizen of the US and the Philippines, on April 22. The regulator alleges that Palafox misappropriated over $57 million in investor funds through his company, PGI Global, between January 2020 and October 2021. The SEC claims that Palafox used a multilevel marketing model to execute a “Ponzi-like” scam, luring investors with false claims of crypto industry expertise and a supposed AI-powered auto-trading platform.

Palafox is accused of hosting lavish events in Dubai and Las Vegas to recruit new members, offering referral bonuses to those who brought in additional investors. The funds from investors were allegedly used to pay other investors and to finance Palafox's personal expenditures, including luxury cars, watches, and homes.

Scott Thompson, associate director of the SEC’s Philadelphia office, stated that Palafox attracted investors with the promise of guaranteed profits from sophisticated crypto asset and foreign exchange trading. However, instead of trading, Palafox used the funds for personal gain.

The SEC is seeking a permanent injunction to ban Palafox from future sales of securities and crypto assets, repayment of ill-gotten gains, and civil penalties. The Justice Department has also filed criminal charges against Palafox, including wire fraud, money laundering, and unlawful monetary transactions. Prosecutors allege that Palafox misled investors with false promises of daily returns ranging from 0.5% to 3% from Bitcoin trading and hid information about PGI’s profitability, licenses, and business activity.

The indictment reveals that Palafox claimed substantial returns were generated via the company’s crypto exchanges, asserting that his traders could make money regardless of Bitcoin's price movements. However, the Justice Department alleges that most investors' money was never used to buy or trade Bitcoin, and many lost some or all of their funds.

If convicted, Palafox would be required to forfeit property including over $1 million in cash, 17 vehicles, and various luxury items. The scheme involved several linked companies, including the Praetorian Group International Trading Inc., whose website was seized by the Department of Justice in 2021, leading to the shutdown of its UK-based operations by the UK’s High Court.

This case marks the first crypto-related action under the new SEC chair, who was sworn in on April 22. The SEC had previously brought a case against Nova Labs in January, accusing it of selling unregistered securities by offering devices that mined the Helium (HNT) token. The SEC reached a settlement with Nova Labs in April, resulting in the dismissal of the lawsuit and a $200,000 civil penalty.