The Commodity Futures Trading Commission (CFTC) has charged five people with running a Ponzi scheme. According to the complaint, they used the promise of digital assets they did not actually receive in order to promise investors handsome profits. The defendants targeted their own Spanish-speaking community in what the CTFC is calling “affinity-based fraud.” In the CFTC’s view, victims may be overly vulnerable to pressure from people they believed had a lot in common with them. Affinity fraud and other scams are on the rise.
The Commodity Futures Trading Commission (CFTC) has taken action against five people accused of defrauding more than 170 investors. The victims were predominantly Spanish-speaking and lost large sums of money as a result of the scam.
CFTC allegations
In a complaint filed in the US District Court for the Central District of California, the CFTC described a digital asset commodity trading business that lured victims with promises of profits, commissions and referral rewards. The company, “Icomtech,” uses pretentious marketing materials offering luxury vacations and cars, iPhones, and Rolexes to convince others to sign up.
Respondents allegedly promised a lucrative opportunity. Providing participants with an opportunity to earn 20% commission for each package sold and an additional 3% for packages sold by their direct affiliates.
However, the organizers never actually received any digital assets as agreed upon. Instead, the CFTC alleged that the five embezzled funds entrusted to them, operating an “old-school Ponzi scheme.”
affinity-based fraud
The commission’s statement highlights how the hoax targeted a Spanish-speaking community in California. In the statement, CFTC Commissioner Kristin N. Johnson explains how such crimes are “clearly problematic”:
“Affinity-based fraud schemes often seek to exploit the trust generated within a community. Criminals target identified communities because they are familiar with the fears and challenges investors face in reporting fraudulent details to law enforcement or regulatory authorities. may prevent you from reporting or communicating effectively.
Most tracked crypto crimes occur on-chain, either through hacks or fraud. However, here the defendants appear to be merely using the digital asset as an inducement for profit.
The problem of crypto-related crime is chronic and serious. Chainalysis, which tracks crime, reported 2022 as a record year for criminals. The total cryptocurrency value received by illegal addresses increased for the second year in a row, despite the market slump.
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