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Feds bust a $32m cyptocurrency scam - but it's not Bitcoin
The cryptocurrency world has been rocked by another scandal after US regulators file fraud charges against the operator of a global pyramid scheme involving a digital currency called GemCoin.
About $32 million was swindled out of investors by US Fine Investment Arts (USFIA) which claimed it owned large amber mines in Argentina and the Dominican Republic, the Securities and Exchange Commission (SEC) said in a statement.
The SEC has put Californian Steve Chen, and 13 companies linked to him, at the center of the alleged fraud
It claims that Chen falsely promoted USFIA as a legitimate multi-level marketing company and told investors they could profit by investing in amounts from $1,000 to $30,000, and earn larger returns as more investors are brought into the program.
Chen is alleged to have then converted existing investors’ holdings into Gemcoins, saying the virtual currency was secured by the company’s amber holdings. In reality, the SEC says, the were worthless.
In its litigation filing, SEC said the $32 million raised from Gemcoin went straight into Chen’s personal accounts in China, which are now frozen.
However by the time the SEC rumbled Chen. the majority of the funds were already blown on luxury cars, travel, entertainment, and cash withdrawals.
Photo: Michael Rhys