Owners of Gemcoin Ponzi digital currency have finally met their waterloo as US Securities and Exchange Commission has ordered them to pay a whooping USD74 million in fines.
Before the clampdown on the leaders, Gemcoin was a fictitious cryptocurrency peddled as a genuine digital currency.
According to Coindesk reports, the judgment comes more than a year and a half after the SEC raided the offices of a company called US Fine Investment Arts Inc (USFIA), said to be connected to the scheme. Gemcoin was alleged to be tied to amber mine holdings owned by USFIA, effectively acting as a value-add to precious stones customers believed they would receive.
Yet, the SEC went on to argue in court that the venture was largely fraudulent, and that CEO Steven Chen had diverted most funds to unrelated shell companies. These shell companies are believed to hold most of the ill-gotten gains and are listed as co-defendants by the SEC.
According to a judgment handed down on Monday, Chen and a cluster of related entities – including two real estate trusts, a consulting business and a golf course holding company – were ordered to pay $51.9m in disgorged profits. The court also left Chen on the hook for $3.8m in prejudgment interest, as well as a civil penalty worth $16.7m.
Whether the SEC’s successful case against Chen and USFIA represents the last of the Gemcoin story, however, remains to be seen.
Among the details put forward in past court filings, including a $100m class-action lawsuit, was the allegation that persons tied to the Gemcoin scheme had shifted their resources elsewhere, suggesting that recovery efforts for affected investors could stretch on for some time.
Past reports also indicate that the Federal Bureau of Investigation (FBI) has been investigating Gemcoin, though it’s not immediately clear if the agency has any grounds to file any charges.
Other Ponzi digital currencies with fraud alerts warnings include: OneCoin, SwissCoin, Africoin.
Nigeria, Uganda, Italy, Hungary and many other countries have already banned and raised fraud alerts on OneCoin and its backers who are mostly running the schemes via network marketing organisations.