WASHINGTON: One of the nation’s top consumer watchdogs is trying to put a stop to a series of alleged cryptocurrency scams that promised victims massive rewards for recruiting new members into the schemes.

The lawsuit by the Federal Trade Commission (FTC) takes aim at so-called “chain referral” schemes involving cryptocurrencies, a first for the consumer protection agency. It marks the FTC’s latest effort to stem a wave of deceptive and misleading activity in the world of bitcoin, highlighting the issue’s growing profile as more Americans turn to the virtual currency as an investment alternative.

The illicit activity affected some 30,000 consumers worldwide, according to FTC estimates based on claims made by the individuals named in the suit. In response to the FTC’s complaint, the agency said, a federal court in Florida has halted the operations of four men who the FTC says promoted various scams on YouTube, social media and conference calls.

Two of the alleged scams, known as Bitcoin Funding Team and My7Network, told consumers that participating in the plan could turn a $100 initial investment in bitcoin into as much as $80,000 in monthly income. But the rewards rarely matched the rhetoric, according to the FTC’s complaint. Participants could only earn money as part of the scheme if they persuaded others to join and make their own upfront payments, the agency said.

“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 Defendants,” the complaint reads. —Bloomberg/The Washington Post

Published in Dawn, March 18th, 2018