SEC Shuts Down Bitcoin Fraud Scheme Sold Using Twitter, Facebook

SEC Shuts Down Bitcoin Fraud Scheme Sold Using Twitter, Facebook
geralt / Pixabay

Fraud schemes follow hot markets and hot money, and Bitcoin is no exception.

Bitcoin might not be the issue, despite frenzied market behavior

Bitcoin is the center of the Mt. Gox collapse, the online exchange where 850,000 Bitcoins worth over $27 million “disappeared.” This news follows a recent Bitcoin executives’ suicide, which comes on the heels of news that the Securities and Exchange Commission took emergency action to shut down an alleged fraudulent Bitcoin pyramid scheme promoted on Facebook Inc (NASDAQ:FB) and Twitter Inc (NYSE:TWTR).  With this scheme the issue might not be Bitcoin, but investors understanding that guarantees of above average returns should always be considered a red flag.

According To Jim Chanos, This Is The Biggest Story No One Is Talking About

Jim ChanosWhen a liquidity crisis struck China's Evergrande Group in the summer of 2021, it shook the global markets. Debt payments by China's second-largest property developer by sales were estimated in the hundreds of billions of dollars, and the company missed several payments. Those missed payments led to downgrades by international ratings agencies, but the Chinese Read More

Promised 2% to 3% returns per week

The SEC claims Mutual Wealth has “been exploiting investors” using social media including Facebook Inc (NASDAQ:FB) and Twitter Inc (NYSE:TWTR). Investors were promised returns of 2% to 3% a week, the SEC says, by using an investment strategy that “invests into securities for no more than a few minutes.”

No investing done, money shipped offshore

What really happened is a different story.  In a complaint filed in the U.S. District Court for the Central District of California, the SEC contends all of Mutual Wealth’s claims are in fact false. Rather than making investments, the company ships the money to offshore bank accounts held in a web of phony front companies. “Mutual Wealth used Facebook Inc (NASDAQ:FB) and Twitter Inc (NYSE:TWTR) as well as a team of recruiters to spread a steady stream of lies that tricked investors out of their money,” Gerald Hodgkins, an associate director in the SEC’s Division of Enforcement, said in a statement.

Investors paid commission to recruit other investors

Roughly 150 U.S. investors opened accounts with Mutual Wealth, investing $300,000, the SEC says. Mutual Wealth perpetuated the pyramid scheme by offering a commission to their investors when they could recruit other investors.

California SEC investigators have been busy lately. Readers will recall that the SEC recently shut down a Hollywood “pump and dump” fraud scheme selling shares in a phony movie company, as reported in ValueWalk.

Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)
Previous article Loeb’s Third Point Nominees For Sothebys Get Marcato’s Backing
Next article Diversification is the Word for Richard Chilton in Q4

No posts to display