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.
When 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.