Bitcoin: Cryptocurrency scammers sued by US Federal Trade Commission
Bitcoin Funding Team and My7Network carried out 'chain referral' pyramid scheme, consumer watchdog alleges
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Your support makes all the difference.The US Federal Trade Commission (FTC), Washington's consumer watchdog, has filed a lawsuit against two businesses it accuses of operating cryptocurrency pyramid schemes.
The FTC is taking action against Bitcoin Funding Team and My7Network over what it defines as "chain referral" scams, in which participants pay upfront entry fees in order to be able to recommend others to follow suit.
The companies allegedly promised customers who made an initial investment of just $100 (£71) that they could earn an $80,000 (£56,938) monthly income from doing so - although payouts seldom amounted to anything like that.
The two businesses defrauded an estimated 30,000 people worldwide between them, the lawsuit alleges.
"Bitcoin Funding Team's structure, which created a continual chain of recruitment and recruitment-related payments, ensured that few participants would obtain the results depicted or projected by the defendants," the FTC's complaint reads.
A Florida federal court has since halted the operations of the four men - Thomas Dluca, Louis Gatto, Eric Pinkston and Scott Chandler - who are said to have promoted the companies via conference calls and on social media.
Both businesses advertised on YouTube and Twitter, channels that may not be available for much longer as the latter seems set to follow Google, Facebook and Reddit in outlawing adverts for speculative cryptocurrency projects in a bid to offer consumers greater protection.
The global digicoin market is facing renewed threats of regulation at a time when more and more consumers see it as an exciting alternative investment opportunity.
In fact, the volatility and wildly fluctuating values of virtual currencies like bitcoin, ethereum and litecoin make its future far from clear-cut.
Bitcoin, which dominates the market, has suffered a rocky patch of late and is valued at $8,550 (£6,080) at the time of writing, according to Coinbase, a major fall from the all-time high of $19,850 (£14,214) it achieved just prior to Christmas.
Comedian John Oliver recently sent up the crypto-craze on Last Week Tonight, cautioning would-be investors that, "in a speculative mania, it can be incredibly hard to tell which companies are for real."
"The vast majority of people buying these coins are not paying much attention to the details of the startups they are attached to, they are responding to the huge fervour," he observed.
The satirist is by no means alone in expressing scepticism.
Prominent figures from Warren Buffett and JPMorgan Chase CEO Jamie Dimon to Mark Carney, Governor of the Bank of England, have all stressed their doubts about its viability.
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