Minds Behind Crypto Scam Charged with $500,000 and More by US FTC
On February 16th, 2018, the Federal Trade Commission (FTC) of the United States filed a lawsuit against four individuals—Thomas Dluca, Louis Gatto, Eric Pinkston, and Scott Chandler—for violating FCT Acts by “advertising, marketing, and promotion of purported money-making schemes.” In their complaint, the FTC identifies Thomas Dluca as the founder and a promoter of Bitcoin Funding Team. Dluca, Pinkston, and Gatto falsely promised participants of massive returns by paying cryptocurrencies to enroll in schemes marketed under the names of Bitcoin Funding Team and My7Network.
On March 2018, the FTC first obtained a court order against these four individuals that stopped their manipulative marketing practices and froze their assets.
Following a federal trial in a U.S. District Court at Southern Florida, the FTC, on August 22nd, 2019, officially announced the settlement of the lawsuit. It read,
the promoters of recruitment-based cryptocurrency schemes are permanently banned from operating or participating in any multi-level marketing program, as part of a settlement with the Federal Trade Commission.
Additionally, a part of their proposed settlement charges Dluca with $453,932 and Chandler with $31,000. Pinkston also agreed to a $461,035 judgment, which will be suspended upon payment of $29,491, due to his inability to pay the full amount. It remains unconfirmed if Gatto pays a settlement. At present, it’s a total of over $500,000 that the settlement demands these men to pay.
These individuals have been permanently prohibited from
operating, participating in, or assisting others in promoting or operating any multi-level marketing program, pyramid, Ponzi, or chain referral scheme.
Crypto Pyramid Schemes or Ponzi schemes are investment scams that involve the
payment of existing investors from funds accumulated from new investors. Funds are often generated by luring investors with high returns in exchange of little to no risk.
The four individuals convicted by FTC sat at the top of a pyramid scheme under the corporate names Bitcoin Funding Team and My7Network. These fraudsters promoted the cryptocurrency programs through websites, YouTube videos, social media, and conference calls. In an instance, investors were promised as much as $80,000 every month for a comparatively negligible initial investment of $100. Founder, Dluca, misleadingly told listeners on a marketing call on behalf of the company that it “will make a millionaire of everybody on this phone.” Contrarily, most participants failed to even recoup their initial investment.
Startup iBackPack was also sued by the FTC, earlier this year, for misusing $800,000 of funds raised in the course of four crowdfunding campaigns from consumers.
China and Japan see similar fraudulent cases, as well. Last year, in November, Tokyo police arrested eight men for collecting 7.8 billion yen (almost $69 million) from thousands of victims across the country in the name of cryptocurrency pyramid schemes. From February to May 2017, these men faked an US-based investment firm called “Sener,” and collected 29 million yen (about $2,55,403) in cash from nine people, promising to purchase bitcoins on their behalf, police reportedly said.
