SEC Charges Two Brothers Over Alleged $60 Million Crypto Ponzi Scheme

On Monday, the U.S. Securities and Exchange Commission charged two brothers for allegedly defrauding over 80 investors for more than a year in an alleged $60 million crypto Ponzi scheme.

The SEC secured "emergency asset freezes" against Jonathan Adam from Angleton, Texas, and his brother Tanner Adam from Miami, Florida, as well as their businesses, GCZ Global LLC and Triten Financial Group LLC, according to a statement on Monday.

Filed in the U.S. Northern District Court of Georgia, the complaint charges the Adam brothers and their companies for violating antifraud provisions within federal securities laws. 

According to the SEC, the brothers misled investors with promises of 13.5% monthly returns between January 2023 and June 2024 through a cryptocurrency trading “bot”  they claimed could identify profitable arbitrage opportunities.

The SEC accuses the Adam brothers of defrauding investors by claiming that their funds would be placed in a lending pool to fund “flash loans” through smart contracts to execute the trades.

Flash loans, which allow borrowing without collateral as long as the loan is repaid within the same blockchain transaction, were pitched as a foolproof way to make money. However, the SEC's complaint reveals that the Adam brothers fabricated the existence of their so-called lending pool.

The SEC states that the brothers informed investors that their funds would be wired to the crypto exchange Kraken, where U.S. dollars would be converted into Tether's stablecoin, USDT.

The Adam brothers also assured investors their USDT would then be quickly moved into a crypto wallet and used in a lending pool for high-frequency trades.

“Of the $61.5 million of investor funds raised by Defendants, at least $53.9 million was either misappropriated or used to pay interest, pay finders fees, and return principal to existing investors,” the SEC alleged in its complaint.

The SEC also alleges the Adam brothers siphoned millions of dollars to finance their luxurious lifestyles.

Tanner Adam allegedly used investor funds to conduct installment payments on a $30 million Miami condo. At the same time, the SEC accuses Jonathan Adam of spending at least $480,000 on luxury vehicles, including cars, trucks, and recreational vehicles.

The Adam Brothers continued dissipating assets into June 2024, depleting investor funds to less than $400,000 in their controlled bank accounts, according to the complaint. 

The SEC is pursuing permanent injunctions, return of profits, and civil penalties.

Edited by Sebastian Sinclair