SEC and feds charge man over $200M crypto trading scheme

The US Securities and Exchange Commission and federal prosecutors have charged a man they allege created a crypto scheme that swindled 90,000 people out of $200 million in the hopes of earning returns from Bitcoin and forex trading.

The SEC said on April 22 that it had charged Ramil Palafox, a dual citizen of the US and the Philippines, claiming he misappropriated over $57 million in investor funds gained through his company, PGI Global, between January 2020 and October 2021.

The regulator alleged Palafox used a multilevel marketing model to execute a “Ponzi-like” scam until the company’s collapse in 2021. The SEC said he lured investors through “false claims of crypto industry expertise and a supposed AI-powered auto-trading platform.”

The SEC claimed Palafox hosted lavish events in Dubai and Las Vegas to recruit new members who were offered referral bonuses to recruit others and used investor funds to pay other investors to further promote the scheme, as well as to line his own pockets.

Excerpt from the SEC’s complaint against Ramil Palafox. Source: SEC

“Palafox attracted investors with the allure of guaranteed profits from sophisticated crypto asset and foreign exchange trading, but instead of trading, Palafox bought himself and his family cars, watches, and homes using millions of dollars of investor funds,” said Scott Thompson, associate director of the SEC’s Philadelphia office. 

The SEC is charging Palafox with violating the anti-fraud and registration provisions of the federal securities laws and is seeking a permanent injunction to ban him from the future sale of securities and crypto assets, repayment of ill-gotten gains and civil penalties. 

Justice Department files twin action

The SEC’s complaint is running parallel to action brought by the US Attorney’s Office for the Eastern District of Virginia, which arraigned Ramil Palafox on criminal charges. 

According to an indictment filed under seal on March 13, federal prosecutors charged Palafox with wire fraud, money laundering and unlawful monetary transactions.

Prosecutors alleged Palafox misled investors with false promises of daily returns ranging from 0.5% to 3% from Bitcoin trading and hid information about PGI’s profitability, licenses, and business activity. 

The indictment said Palafox told investors that substantial returns were being generated via the company’s crypto exchanges and that “his traders were able to make money regardless of whether the price of Bitcoin was going up or down.” 

However, the Justice Department alleged that, in reality, most investors' money was never used to buy or trade Bitcoin, and many lost some or all of their funds.

Property listed in the indictment that would be forfeited by Palafox if convicted includes over $1 million in cash, 17 vehicles, including two Teslas, a Ferrari 458 Special, two Lamborghinis, and two Porsches, plus a variety of designer bags, wallets, shoes, jewellery and watches.

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Various linked companies were included in the scheme, including the Praetorian Group International Trading Inc., the website for which was seized by the Department of Justice in 2021, leading to its UK-based operations being shut down by the UK’s High Court.  

It’s the agency’s first crypto-related case under its crypto-friendly SEC chair, Paul Atkins, who was sworn in on April 22.

The SEC had brought a case against Nova Labs in January, accusing it of selling unregistered securities by offering devices that mined the Helium (HNT) token. The SEC reached a settlement with Nova Labs in April that resulted in the lawsuit being dismissed and a $200,000 civil penalty.

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