SEC Cracks Down $60M Crypto Ponzi Scheme, Charges Brothers Jonathan and Tanner Adam

• Two brothers are accused of operating a crypto Ponzi scheme since January 2023.
• The SEC alleges the brothers misused $53.9 million of the scheme’s total proceeds.
• The scheme promised a monthly return of 13.5% using smart contracts and bots.

The U.S. Securities and Exchange Commission has charged two brothers with operating a $61.5 million Ponzi scheme.

Ponzi Trading Bots

As per the charges detailed in an Aug. 26 complaint filed  at the U.S. District Court for the Northern District of Georgia, Atlanta, brothers Jonathan and Tanner Adam baited more than 80 investors by promoting a non-existent crypto trading bot.

The complaint states that between January 2023 and “as late as” June 14, 2024, the brothers illegally raised roughly $61.5 million from more than 80 investors through their companies, Triton Financial Group and GCZ Global.

Promising monthly returns of 13.5%, investors were invited to participate in a crypto asset lending pool operating by the brothers, who claimed it was a decentralized finance (DeFi) offering. The SEC writes that the brothers told investors that they had:

“[…] invented an automated software “bot” that identifies and enters into “smart contracts. The Adam Brothers told investors that the smart contracts provide “flash loans” to arbitrage traders who trade crypto assets among crypto asset trading platforms.”

They told investors that monthly returns were guaranteed as the fees were raised through capital generated from “flash loans.”

Offering a false sense of security to investors, the Adam Brothers would also offer to lock up funds in a bot for deployment in the pool so that no one, brothers included, could access the funds until an agreed-upon or pre-determined date.

The Fallout

The complaint also alleges that the brothers had misappropriated $53.9 million of the $61.5 million raised, writing:

“As we allege, the Adam brothers promised their investors high returns on a crypto investment that did not exist, and then used investor funds to make Ponzi-like payments and to purchase designer goods, recreational vehicles, and million-dollar homes,”

Notably, the Adam brothers allegedly leveraged $30 million to place a downpayment on a condominium in Miami and spent at least $480,000 on cars, trucks, and recreational vehicles.

Justin Jeffries, Associate Director of Enforcement at the SEC’s Atlanta office, stated  that the scheme was entirely fraudulent, adding:

“The SEC will use all tools at its disposal to stop those who exploit the excitement around new technologies to defraud investors.”

The duo and their respective companies are being charged with violating the antifraud provisions of federal securities laws. The SEC will seek permanent injunctions, “disgorgement of ill-gotten gains with prejudgement interest,” and civil penalties.

Crypto Frauds

This won’t be the last time that some malicious actors leverage the concept of crypto to bait investors into a fraudulent trap.

Despite the best efforts of lawmakers, regulators, and governments around the world, crypto-related schemes and frauds persist.

That said, the numbers are down. According to Ponzitracker, crypto Ponzi  schemes made up approximately a quarter of all crypto frauds in 2022.

In 2023, this figure was down to 15%, suggesting that both education amongst investors and enforcement from regulators are working.

About the Author

Eddie Mitchell

Eddie has been writing news and content primarily for crypto news and industry players over the past seven years. With an eye for the bigger picture, Eddie prefers to investigate the broader implications of a story, as well as explore the weird and wonderful world of crypto. He believes blockchain has already changed the world, but observes the space overall with a skeptical and adoring eye.

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