The U.S. Federal Trade Commission announced this week that it has reached a settlement with the promoters of two cryptocurrency-related chain referral multi-level marketing schemes, Bitcoin Funding Team and My7Network. As part of the settlement agreement, the individuals involved in the schemes have agreed to monetary fines and are permanently prohibited from operating similar ventures in the future.
The defendants named in the FTC announcement include Thomas Dulca, Eric Pinkston, Scott Chandler, and Louis Gatto. The four were accused of engaging in deceptive practices and had their assets frozen when the commission obtained a court order early last year. Three of the defendants, Dulca, Gatto, and Pinkston, had allegedly made false promises of large returns to those who invested cryptocurrency in Bitcoin Funding Team and My7 Network.
The commission described the schemes in its August 22 announcement:
According to the FTC, Bitcoin Funding Team and My7Network were chain referral schemes—a type of pyramid scheme. These schemes depend on continual recruitment of new participants to generate revenue. A fourth defendant, Scott Chandler, promoted Bitcoin Funding Team and another deceptive cryptocurrency scheme, Jetcoin, which promised participants a fixed rate of return, but failed to deliver on these claims, the FTC alleged.
The defendants promoted the cryptocurrency programs through websites, YouTube videos, social media, and conference calls, claiming, for example, that Bitcoin Funding Team could turn a payment of the equivalent of just over $100 into $80,000 in monthly income. The FTC alleges, however, that the structure of the schemes ensured that few would benefit. In fact, most participants failed to recoup their initial investments.
Dulca has agreed to pay the FTC $453,932, while Chandler will pay $31,000. Pinkston’s judgment is for $461,035, but that amount will be suspended once he pays $29,491 since he is apparently unable to pay the full judgment.
In addition to the monetary judgment, all three defendants, along with Gatto, are permanently prohibited from operating, participating in, or assisting others in promoting or operating any multi-level marketing program, pyramid, Ponzi, or chain referral scheme. They also are prohibited from misrepresenting as part of a business venture or investment opportunity the amount of income that participants will receive or other aspects of the business venture or investment opportunity.