The Securities and Exchange Commission today charged a Florida businessman in a case involving a Ponzi Scheme disguised as a cryptocurrency trading scheme.
The regulator said Thomas J. Gity, who was convicted for operating fraudulent fund-raising campaigns, had set up and ran a digital asset trading firm though it has no professional financial industry experience.
He allegedly raised $6.8 million from at least 18 investors through the scheme. Out of this figure, only $970,000 was used in trading accounts.
Gity allegedly used the funds he raised on personal expenses, gambling and transferred over $1.8 million to his son, resulting in him being unable to pay his investors’ cash commissions or other bonuses.
Additionally, in order to shore up the fraud, they used a Ponzi-style scheme in which they paid some money to early investors that they claimed represented profits but were, in fact, other investors’ funds.
A Ponzi-Style Scheme
Gity and his son were convicted two decades ago of embezzlement stemming from a scheme in which they skimmed proceeds from charities. This criminal record bars him from working as a professional fundraiser.
The defendant cold-called potential clients and convinced them to invest in the company. The victims were told their cash would be used to trade in digital asset markets. The fraudsters even went as far as to draft performance reports which falsely claimed their pools had achieved stunning annual returns for investors.
Additionally, the complaint details Gity’s alleged means of concealing trading losses, including issuing false monthly account statements and checks that purported to represent trading profits and investment returns.
Further explaining the scheme, the SEC alleges that Gity provided fake account statements that show he managed as much as $100 million in assets and generated returns in excess of 46% in a week.
For new participants, they were assured to receive guaranteed annual returns, while they were actually duped into a Ponzi scheme. Nearly all of the pool money was lost, according to the complaint that accuses the defendant of fraud, misappropriation, registration violations and issuing false statements.
