Home Markets News & Opinions Feds Bust Gemcoin Startup Accused of a $32 Million Scam

Feds Bust Gemcoin Startup Accused of a $32 Million Scam

Samburaj Das
Last Updated March 4, 2021 4:45 PM

Federal authorities have raided an alleged Ponzi investment scam that promised to pay dividends to investors by claiming to hold amber mines whose profits would be paid out in the cryptocurrency – Gemcoin.

The Securities and Exchange Commission (SEC) announced the filing of fraud charges and the raid of a Southern California company – USFIA, allegedly running a Ponzi scheme that raised more than $32 million from investors both within and outside the U.S. since April 2013. The accused include founder Steve Chen and a total of 13 California-based companies at the center of the Ponzi scheme.

Essentially, Chen falsely promoted Arcadia-based USFIA as a marketing company owing large amber mines in the Dominican Republic and Argentina and other assets worth $50 billion, to investors. Buy-ins were set at amounts ranging from $1000 up to $30,000.

The full press release from the SEC is available here .


Numerous videos, websites and presentations promoting Gemcoin represented the cryptocurrency as one to better Bitcoin.


Chen also told investors that the U.S. government had purchased 70% of Gemcoins in circulation, and a 6,400% profit was guaranteed, according to promotional material.

Thousands of people are said to have invested in the company by changing their cash into “Gemcoin”, a cryptocurrency. Investors were told that the virtual currency was secured by the company’s amber holdings. However, the SEC’s complaint alleges that Gemcoins are entirely without worth.

Gemcoin was deemed a “breakthrough in finance” by Arcadia City Councilman and former-mayor John Wuo, who repeatedly endorsed the cryptocurrency. The councilman is currently under investigation by the FBI for his part in the scheme, although Wuo is not listed in the SEC complaint.

According to the claim filed by the SEC in a California district court, Chen tried to wire $7.5 million out of USFIA’s account at Bank of America to a Chinese bank. The attempt was made after the Arcadia police department interviewed Chen about a related case that involved alleged death threats against unhappy Gemcoin investors.

The SEC also added that Chen offered investors shares in the company and that the USFIA would go public with an IPO.

However, the SEC claimed:

Indeed, USFIA never engaged in an IPO and investors have been unable to sell or auction off their Gemcoins, and their value is de minimis.

The SEC has frozen the Chen’s assets along with those of the 13 associated companies. The charges include the unregistered sale of securities, fraud in the sale of securities and fraud in connection with the purchase and sale of securities.

“We allege that the defendants’ false claims of riches that investors would realize from USFIA’s amber mining activity never materialized,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office.

In reality, as alleged in the complaint, the defendants were operating a fraudulent pyramid scheme that left many investors with nothing.

Speaking to Ars Technica , Long Liu, a local attorney representing disgruntled investors said that he plans to file a class action lawsuit against Chen and USFIA soon.

“Most people that I’ve talked to invested minimum $10,000,” he said.

So if you do the math, in California alone that’s about $30 million loss and in the US, $100 million. I wouldn’t be surprised if the number turns out to be bigger.

Image credit: Gemcoin Asia