The Securities and Exchange Commission launched a lawsuit again two advisory companies and their owner for running a Ponzi-like cryptocurrency scheme.
The firms operated for over four years and manage to raise nearly $4.4 million.
The lawsuit is against Creative Advancement LLC and Edelman Blockchain Advisors LLC as well as their owner – Gabriel Edelman.
The allegations claim that Edelman, through his companies, “fraudulently offered and sold securities, using false, misleading statements” from February 2017 to May 2021.
The SEC believes he raised $4,390,000 from at least four investors during those four years.
Edelman promised that these funds will be invested in cryptocurrencies, which would have been purchased at discounted promises.
However, the Commission alleged he invested “only a small portion of investor funds in digital assets” and used the majority to fund his “own personal benefit,” including paying off credit cards or sending money to family members.
Additionally, the SEC asserted that Edelman operated a “Ponzi-like” scheme, repaying early investors with some of the new investors’ funds to “encourage their ever-larger investments.”
The agency’s lawsuit alleges Edelman committed securities fraud and requested the court to permanently restrain him from “engaging in the acts, practices, and courses of business alleged herein.”
The SEC lawsuit, which claims that Edelman is currently residing in Spain, explained how one of the Ponzi-like moves worked:
For example, one Investor initially invested $50,000. Edelman returned $75,000 within a few months, and the Investor subsequently invested an additional $600,000. Edelman then returned $720,000 a few months later. After that, the Investor invested $1,000,000–based on purported past performance and Edelman’s promise that the Investor would receive a 15% return. Thereafter, Edelman did not return any funds to that Investor.