US FTC Settles With Alleged Crypto Pyramid Scheme for $500,000

The United States Federal Trade Commission (FTC) has settled charges it filed in 2018 against an alleged crypto pyramid scheme involving four individuals.

Banned from multi-level marketing

According to an official statement on Aug. 22, the regulator permanently banned the defendants from multi-level marketing and misrepresenting investment opportunities — and charged a total of more than $500,000 as part of the settlement.

In March 2018, the FTC first obtained a court order against Thomas Dluca, Eric Pinkston, Louis Gatto and Scott Chandler that stopped their misleading marketing practices and froze their assets. At the time, the commission alleged that the individuals violated the FTC Act through the “advertising, marketing, and promotion of purported money-making schemes.”

Referral pyramid scheme

Specifically, the action alleged that the defendants misled investors by promising high returns from paying crypto such as Bitcoin (BTC) and Litecoin (LTC) to sign up for schemes marketed under the names Bitcoin Funding Team and My7Network. The programs represented chain referral schemes, requiring members to constantly recruit new participants to generate revenue.

The defendants had reportedly claimed that Bitcoin Funding Team could turn a $100 payment into $80,000 in monthly income. Eventually, most participants failed to recoup their initial investments.

As part of the proposed settlement, Dluca will pay $453,932, and Chandler will pay $31,000. Pinkston also agreed to a $461,035 judgment, which will be suspended upon payment of $29,491 owing to his inability to pay the full amount. If he is later found to have misrepresented his finances, he will be required to pay the whole sum. The FTC filed the proposed order in the U.S. District Court for the Southern District of Florida.

Earlier this year, the FTC sued startup iBackPack for misusing raised funds of $800,000 during four crowdfunding campaigns from consumers.