The Securities and Exchange Commission (SEC) on Thursday charged 17 people for their purported roles in a $300 million Ponzi scheme that attracted more than 40,000 investors.
The complaint was filed in federal court in Houston, Texas, and comes in the wake of an emergency action taken by the SEC in September 2022, when it halted the operations of CryptoFX, the company it accused of orchestrating a Ponzi scheme.
At the time, charges were brought against Mauricio Chavez and Giorgio Benvenuto, the two key figures involved in the Houston, Texas-based company that operated mainly in the Latino community.
An investigation was launched to identify additional individuals involved in CryptoFX’s alleged Ponzi scheme, which collected $300 million from investors from 10 U.S. states and two foreign countries, according to the SEC.
Seventeen people who are believed to have played leadership roles within the CryptoFX network have now been charged.
“We allege that CryptoFX was a $300 million Ponzi scheme that targeted Latino investors with promises of financial freedom and life-altering wealth from ‘risk free’ and ‘guaranteed’ crypto and foreign exchange investments,” Gurbir Grewal, director of the SEC’s division of enforcement, said in a statement.
“A scheme of that size requires lots of participants, and as today’s action demonstrates, we will pursue charges against not just the principal architects of these massive schemes, but all those who further their fraud by unlawfully soliciting victims,” Mr. Grewal added, in a warning to other schemers.
Returns of ’15 to 100 Percent’
According to the complaint, the accused lured investors by promising returns of 15 to 100 percent on their investments, generated through crypto assets and foreign exchange trading.
“In the end, the only thing that CryptoFX guaranteed was a trail of thousands upon thousands of victims,” Mr. Grewal stated.
However, the funds raised were allegedly not utilized for trading purposes as promised. Instead, they were purportedly misappropriated to pay fictitious returns to earlier investors, fund personal commissions and bonuses for the defendants, and support their own lavish lifestyles.
The SEC alleges that the funds raised were, for the most part, not used for trading purposes but to pay supposed returns to other investors, to pay commissions and bonuses to themselves and investors, and “to fund their own lifestyles.”
According to the SEC, two of the defendants, a couple by the name of Gabriel and Dulce Ochoa, continued soliciting investments after the court issued orders to halt CryptoFX’s operations. Another defendant, Maria Saravia, allegedly told investors that the SEC’s lawsuit was fake.
The Ochoas, Ms. Saravia, Gloria Castaneda, Ismael Zarco Sanchez, and Roberto Zavala were charged with violating the anti-fraud, securities-registration, and broker-registration provisions of the federal securities laws.
Mr. Ochoa is also charged with violating whistleblower protection provisions, after he told two investors to retract their complaints to the SEC if they wished to recover their investments.
The complaint further charged Gabriel Arguelles, Hector Aquino, Orlin Wilifredo Turcios Castro, Carmen De La Cruz, Elizabeth Escoto, Reyna Guiffaro, Marco Antonio Lemus, Juan Puac, Luis Serrano, Julio Taffinder, and Claudia Velazquez with violating the securities-registration and broker-registration provisions.
The SEC is seeking permanent injunctions, disgorgement with prejudgment interest, and civil penalties against each defendant.
Two defendants, Mr. Serrano and Mr. Taffinder, have already agreed to final judgment without admitting or denying the actual allegations. If approved by the court, they will pay $68,000 in civil penalties.
