The cryptocurrency space is filled with opportunity and creativity, but it’s where scams go to flourish. One such case, PGI Global is a clear reminder of how risky investments in the crypto space can be. Founder of PGI Global now indicted on felony charges. He’s accused of having run a $300 million crypto-based MLM (multi-level marketing) con, with thousands of investors left holding the bag. Token ATH! is back to explain why it all went down, how these schemes operate, and how you can edit yourself.
This article will help you identify the warning signs of crypto MLM schemes. You’ll learn simple, easy-to-follow steps to recognize and protect yourself from these cons. We will break down the PGI Global case, highlighting the specific tactics used, and offer a checklist for evaluating the legitimacy of crypto investment opportunities, emphasizing the importance of independent research and skepticism.
Understanding the PGI Global Scheme
PGI Global attracted investors by promising them profits guaranteed through complicated crypto asset and forex trading. The lure of fast cash lured the unknowledgeable and uninformed. All the while, the company’s bogus assertions of crypto-savvy did the trick, winning their trust. They pitched themselves as the new thing, with an auto-trading platform powered by AI. This was truly just a cover for what was, frankly, an international securities fraud.
At the heart of the scheme was the need to lure in fresh blood. New investors. The company offered unusually high returns, which served as a strong lure. These returns were not based on actual trading gains. They were propped up by the contributions paid in by the fresh young recruits, a very telling example of a Ponzi scheme. With new investments making it possible to grow faster than ever before, the culture of success became a trap, luring in yet more people to participate.
Red Flags of Crypto MLM Schemes
Several red flags can help you identify and avoid crypto MLM schemes:
Unrealistic Returns and Recruitment Focus
- Promise of guaranteed high returns in a short time: Be wary of claims like "50% return on investment in two months," "Earn 5% daily with no risk!" or "I doubled my money in just a week!" These promises are almost always too good to be true.
- Emphasis on recruiting new investors: Legitimate projects focus on their core business. If the primary focus is on recruiting, with promises of high returns for doing so, it's a major red flag.
Lack of Transparency and Celebrity Endorsements
- Disappearing act: Be cautious of a lack of transparency, an unresponsive team, or the sudden disappearance of the company's representatives.
- A famous face: The use of celebrity endorsements to lure investors can be misleading. These endorsements may be fake or simply paid promotions.
Ponzi-like Structure
- Projects relying on new investors' funds: If the project relies solely on new investors' funds to pay returns to earlier investors, it is a Ponzi scheme.
Legal Consequences for Founders
Criminal penalties For the founders of fraudulent crypto MLM schemes, the future is bleak. These can include:
- Investment fraud charges: These charges can lead to significant fines and imprisonment. The FBI's annual Internet Crime Report noted a nearly 200% rise in investment fraud involving cryptocurrency in 2022, reaching $2.57 billion.
- Securities laws violations: If the MLM scheme involves the sale of securities, founders may face charges for violating securities laws, such as the Securities Act of 1933 and the Securities Exchange Act of 1934.
- Anti-money laundering (AML) and know-your-customer (KYC) violations: Founders may face charges for failing to implement adequate AML and KYC procedures, which can lead to money laundering and other financial crimes.
- Tax evasion and money laundering charges: Cryptocurrency transactions are subject to tax laws and anti-money laundering regulations. Founders may face charges for violations.
- Federal and state charges: Authorities such as the US Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC), and state attorneys general can bring charges against founders of fraudulent crypto MLM schemes.
How to Evaluate Crypto Investment Opportunities
Here's a checklist to help you evaluate crypto investment opportunities:
- Check for a legitimate white paper: A real white paper should provide detailed information about the project, its technology, and its goals, but not read like a marketing brochure.
- Look for outside security reviews: A legitimate project should have outside security reviews, reward programs for finding bugs in the programming, and shared control systems as basic protections.
- Verify two-factor authentication (2FA): The investment platform or wallet should offer 2FA using authenticator apps to add an extra layer of security.
- Check for third-party audits or certifications: Look for third-party audits or certifications that validate compliance with security and regulatory standards.
- Assess the project's fundamentals: Evaluate the project's supply, potential value appreciation, and market capitalization to ensure it is not just hype.
Lessons from Past Schemes
Unfortunately, the PGI Global case isn’t an outlier. Other crypto schemes have defrauded investors. Brothers Johnny and Tanner Adam of Longview, Washington, opened a Ponzi scheme in 2024. They guaranteed investors 13.5% monthly returns by capitalizing on arbitrage opportunities across crypto exchanges. Like PGI Global, they obtained billions of dollars in investments through misleading claims of inflated and guaranteed returns. These cases serve as a reminder that we should learn from failures and be vigilant about the potential for investment scams disguised as exciting new cryptocurrencies.
By recognizing these red flags and learning the lessons of previous schemes you can better protect yourself. By doing proper due diligence, you can greatly minimize your chances of getting directed to malicious crypto-related scams. Just keep in mind, if it’s too good to be true, it likely is. So stay alert, keep on learning, and safeguard your dollars out there.
