The PGI Global founder charged with allegedly running a crypto pyramid scheme. Charge announced by the Securities and Exchange Commission (SEC), alleging that the founder misappropriated millions from investors. The scheme operation was from Jan 2020 to Oct 2021. It guaranteed profits over time by trading crypto assets and foreign exchange.
Rather than conduct these trading activities, the SEC alleges that the founder misappropriated investor funds to pay for his personal expenses. These costs allegedly funded lavish cars, timepieces, and residences for himself and his family. The scheme ultimately unraveled in late 2021, with many investors facing devastating losses.
The investment strategy used by PGI Global included multi-level-marketing-style referral bonuses. This investment model created financial incentives for members to market the opportunity broadly, recruiting new investors to the program. According to the SEC, new investor money funded illusory returns and referral bonuses to current investors. This tactic is most often associated with Ponzi schemes.
"Palafox used the guise of innovation to lure investors into lining his pockets with millions of dollars while leaving many victims empty-handed," - Laura D’Allaird
Laura D’Allaird, Chief of the Commission’s new Cyber and Emerging Technologies Unit, was quoted on the case. The upcoming discussion about crypto regulation should acknowledge the Cyber and Emerging Technology Unit’s work combating fraudulent schemes utilizing cryptocurrency and other emerging technologies.
"As alleged in our complaint, Palafox attracted investors with the allure of guaranteed profits from sophisticated crypto asset and foreign exchange trading, but instead of trading, Palafox bought himself and his family cars, watches, and homes using millions of dollars of investor funds," - Scott Thompson
Scott Thompson, the associate director of the SEC’s Philadelphia Regional Office, commented on the charges. In addition to seeking to recover the misappropriated funds, the SEC wants to impose civil penalties on the founder.
