The US Securities and Exchange Commission (SEC) has charged Ramil Ventura Palafox with cryptocurrency fraud that resulted in a loss of $198 million for investors. In an official announcement, the agency claimed Palafox misappropriated $57 million of the funds.
According to the SEC, Palafox, who is a citizen of both the US and the Philippines, launched PGI Global. He claimed it was a crypto and forex trading firm and charged users for membership between January 2020 and October 2021, promising investors guaranteed high returns.
However, the investment was a Ponzi scheme, with most of the funds raised spent on paying off other investors, while he spent the rest on luxury cars, properties, and other items. Palafox ran the scheme until it collapsed in late 2021.
Speaking on the incident, the chief of the Cyber and Emerging Technologies Unit, Laura D’Allaird, said that Palafox deceived investors with promise of innovative trading methods.
D’Allaird said:
“His false claims of crypto industry expertise and a supposed AI-powered auto-trading platform were just masking an international securities fraud.”
Meanwhile, the US Department of Justice (DOJ) has also charged Palafox criminally over the same incident, with the US Attorney’s Office for the Eastern District of Virginia handling the case. In its own filing, the DOJ accused Palafox of money laundering, unlawful monetary transactions, and wire fraud.
Interestingly, Palafox also ran the same scheme in the UK but only managed to obtain £612,425 (worth $816,000) between July 2020 and February 2021. The UK High Court shut it down in 2022 after the US DOJ seized the website of a connected entity, Praetorian Group International Trading Inc.
SEC seeks disgorgement and other reliefs
While federal prosecutors will be seeking jail terms and forfeitures against Palafox, the financial regulator wants to recover the assets he acquired through the scheme.
The regulator claimed that PGI Membership are securities and that Palafox violated the law by offering and selling unregistered securities, while also violating the antifraud provisions. It is now seeking the court to order disgorgement of all gains with prejudgment interest and civil penalties.
Additionally, the SEC wants a permanent injunction against Palafox that will ban him from participating in any multi-level marketing programs offering or selling securities or crypto assets.
In order to recover the misappropriated funds, the SEC also named several people and entities as relief defendants. These include Palafox’s brother-in-law Darvie Mendoza, his wife Marissa Mendoza Palafox, and possibly an older family member Linda Ventura, and BBMR Threshold LCC.
The agency claimed that Palafox transferred funds and properties acquired to these relief defendants and paid off mortgages for Mendoza and Ventura, while also gifting Ventura a Range Rover. BBMR was the holding company that Palafox used to hide assets purchased with the misappropriated funds, and had two of his relatives as co-managers.
He even transferred his own house, purchased with $1.7 million of investors’ funds, to BBMR in August 2021, a few months before PGI Global collapsed.
Atkins inherits a remodeled SEC
Meanwhile, the case is the first crypto-related case under the new SEC Chair, Paul Atkins, and it aligns with the kind of enforcement actions that the SEC plans to focus on now. The agency has already shown that it will not adopt regulation by enforcement and will only focus on crypto-related cases where fraud and other clear violations are evident.
Even before Atkins took office, the former acting chair Mark Uyeda had already taken several steps to restructure the agency and refocus its attention on traditional cases.
Such actions include dropping lawsuits and investigations against crypto entities, replacing the Crypto Assets and Cyber Unit with Cyber and Emerging Technologies Unit, and creating a Crypto Task Force.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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