Cryptocurrency Chain

The Federal Trade Commission (FTC) files a complaint in federal court, halting the activities of fours individuals promoting deceptive money-making schemes involving cryptocurrencies. The defendants are Thomas Dluca, Louis Gatto, Eric Pinkston, and Scott Chandler. Their schemes are aptly named Bitcoin Funding Team and My7Network. The scams falsely promise robust earnings through cryptocurrencies, by promoting cryptocurrency chain referrals. Their methods include the use of social media outlets, YouTube videos, websites, and conference calls.

The FTC alleges the defendants promise big rewards for a small payment of Bitcoin or Litecoin. The defendants claim it can transform a $100 investment into $80,000 in monthly income. Evidently, and according to the FTC, the scheme structure (a pyramid) ensures only a few individuals benefit. In reality, however, the majority of participants fail to recover their initial investment.

Mechanics of the Scheme

Through the Bitcoin Funding Team/My7Network, revenue generation occurs via new participant recruitment and cryptocurrency payment. For instance, Bitcoin Funding Team participants make an initial bitcoin payment to an earlier participant and then pay a fee to the Bitcoin Funding Team. After making the payments, participants are eligible to recruit new members and receive their own payments.

“This case shows that scammers always find new ways to market old schemes, which is why the FTC will remain vigilant regardless of the platform – or currency used,” said Tom Pahl, Acting Director of the FTC’s Bureau of Consumer Protection. “The schemes the defendants promoted were designed to enrich those at the top at the expense of everyone else.”

Yet another dynamic component of the scheme involves the fraudsters promising investors a fixed rate of return. In this situation, the scheme purports to pay participants on fluctuations in bitcoin exchange trading. Leveraging this scheme, the defendants went as far as to say participants could double their investment in 50 days.

The Federal Trade Commission charges that the defendants are in violation of the FTC Act prohibiting deceptive acts. Specifically, by misrepresenting the chain referral schemes as bona fide money-making opportunities. And further, by falsely claiming participants may earn substantial income by participating in the schemes.

As requested by the FTC, the federal court has issued a temporary restraining order and frozen the defendants’ assets pending trial.