Crypto trading bot just a Ponzi scheme: SEC

A purported automated crypto asset trading program was actually just a US$295-million Ponzi scheme, U.S. regulators are alleging.

The U.S. Securities and Exchange Commission has filed charges against four individuals, alleging that these operators and promoters of a global crypto asset trading scheme called Trade Coin Club duped investors. The regulator said that, between 2016 and 2018, the scheme brought in more than 82,000 bitcoin (valued at US$295 million at the time) from over 100,000 investors worldwide.

In its complaint, the SEC alleged that investors were lured into the scheme with the false promise of profits from an automated crypto trading bot, when in fact any profits paid out to investors came from the deposits of other investors.

It also charged that investor funds were siphoned off by the scheme’s alleged leader (Douver Torres Braga) for his own benefit as well as to pay others to promote the scheme, including the three other individuals being charged.

“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,” said David Hirsch, chief of the SEC enforcement division’s crypto assets and cyber unit, in a release.

The SEC’s complaint alleged that Braga violated the anti-fraud and securities registration requirements. It also alleged violations against the three other individuals, one of whom agreed to settle without admitting or denying the regulator’s allegations. The terms of that settlement, subject to court approval, were not disclosed.

The complaint seeks injunctive relief, disgorgement, and civil penalties against the individuals who have yet to reach a settlement. The allegations against them have not been proven.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.