The U.S. Securities and Exchange Commission (SEC) recently brought charges against two brothers, Jonathan Adam and Tanner Adam, for allegedly running a $60 million Ponzi scheme. The complaint, filed in the United States District Court for the Northern District of Georgia in Atlanta, accused the brothers of defrauding over 80 individuals. The scheme involved falsely claiming to operate a crypto bot that could generate a monthly return of 13.5% for investors.
The Deception
Between January 2023 and June 2024, the Adams brothers misled investors by boasting that their bot could identify arbitrage opportunities and execute profitable trades across various platforms. They assured investors that their funds would be used in a lending pool for flash loans and quick transactions on the blockchain. However, the SEC’s Associate Director of Enforcement revealed that the bot was entirely fictitious. Instead of trading, the brothers allegedly spent a large portion of the raised funds on their lavish lifestyles, including luxury cars and a $30 million condominium.
In response to the scheme, the SEC obtained emergency asset freezes for the brothers’ companies, GCZ Global LLC and Triten Financial Group LLC. The agency charged both Jonathan and Tanner with violating federal securities laws’ anti-fraud provisions. They are seeking permanent injunctions against the companies, the return of all investor funds, and civil penalties. Jonathan, who has a history of securities fraud convictions, invoked the Fifth Amendment when asked to testify during the SEC’s investigation. Meanwhile, Tanner failed to provide any documents or appear for testimony in response to the agency’s subpoena.
The SEC’s actions against the Adams brothers come amidst a larger crackdown on fraudulent schemes in the cryptocurrency space. In 2023, the amount of crypto directed to scam-related addresses decreased by $1.5 billion, indicating a heightened awareness of such schemes. Ponzi and pyramid schemes were identified as the most significant fraud subcategories that year. Recently, NovaTech Ltd. and its principals, Cynthia and Eddy Petion, were also charged by the SEC for defrauding over 200,000 individuals with false promises of profits from safe investments in the crypto and foreign exchange markets.
The case of the Adams brothers highlights the risks associated with fraudulent schemes in the cryptocurrency industry. Investors must exercise caution and conduct thorough due diligence before putting their money into any investment opportunity, especially those claiming unrealistic returns. The SEC’s efforts to combat such schemes serve as a reminder of the importance of regulatory oversight in protecting investors from financial fraud.