The US Federal Trade Commission (FTC) has filed criminal charges against two cryptocurrency companies involved in alleged “chain referral” scams that promise victims massive rewards for recruiting new members.
The lawsuit against Bitcoin Funding Team and My7Network marks the first time the consumer watchdog has initiated a crackdown against the recruitment scheme. The move represents the latest effort by federal authorities to stem a rising tide of deceptive and ambiguous activity in the digital currency space.
It highlights growing concerns over illegal activities involving virtual currencies as more Americans consider the emerging asset class as an alternative portfolio investment.
The FTC complaint said:
“Bitcoin Funding Team's structure, which created a continual chain of recruitment and recruitment-related payments, ensured that few participants would obtain the results depicted or projected by Defendants.”
In relation to My7Network, the regulator told the court:
“Like Bitcoin Funding Team, My7Network's system sets up a continual chain of recruitment. Participants can only recoup their initial investments by recruiting others into the scheme to make bitcoin payments and recruit… In reality, My7Network's chain recruiting structure ensures that most participants will lose money.”
According to the FTC, an estimated 30,000 consumers across the world have been affected by the illegal activities of the two companies. To stop more people from being victimized by the scheme, a federal court in Florida has ordered four men to stop their operations, which promote the scam on social media platforms like Twitter and Youtube, as well as through conference calls.
The complaint said the scams involve promising recruited members that investing an initial $100 in Bitcoin could easily generate at least $80,000 in monthly income. But the participants can only earn money if they encourage others to join the team and make upfront payments, it said.
The FTC added:
“Consumers have suffered and will continue to suffer substantial injury as a result of defendants' (Bitcoin Funding Team and My7Network ) violations of the FTC Act. In addition, defendants have been unjustly enriched as a result of their unlawful acts or practices. Absent injunctive relief by this Court, Defendants are likely to continue to injure consumers, reap unjust enrichment, and harm the public interest.”
Crypto scam crackdown
The FTC action forms part of a broader crackdown against criminal activities in the cryptocurrency space.
Last week, internet giant Google (NASDAQ:GOOGL) followed Facebook’s lead in pulling the plug on ads related to cryptocurrencies and initial coin offerings (ICOs) to clamp down on unregulated and high-risk financial products.
On Sunday, rumors spread that Twitter was also set to launch a ban on crypto-related ads as it revises its advertising policies.
This article appeared first on Cryptovest