SEC Charges Two Brothers in $60 Million Cryptocurrency Trading Bot Ponzi Scheme

TLDR:

• SEC charged brothers Jonathan and Tanner Adam with a $60 million crypto Ponzi scheme
• The scheme allegedly involved a fake crypto trading bot promising 13.5% monthly returns
• Over 80 investors were impacted between January 2023 and June 2024
• The brothers allegedly used investor funds for personal purchases, including a $30 million condo
• SEC obtained emergency asset freezes against the brothers and their companies

The U.S. Securities and Exchange Commission (SEC) has charged brothers Jonathan and Tanner Adam with operating a $60 million Ponzi scheme that defrauded over 80 investors.

The scheme, which ran from January 2023 to June 2024, allegedly involved a non-existent cryptocurrency trading bot that promised returns of up to 13.5% per month.

According to the SEC’s complaint, filed on August 26, 2024, in the U.S. District Court for the Northern District of Georgia, the Adam brothers told investors that Jonathan had created a “bot” operating on a crypto asset trading platform.

This bot supposedly identified arbitrage trading opportunities, allowing for simultaneous purchase and sale of assets to exploit small price differences across markets.

The brothers claimed that investor funds would be used in a lending pool to fund “flash loans” for these arbitrage trades through smart contracts.

They assured investors that their funds were safe, barring a global market meltdown. However, the SEC alleges that no such lending pool existed.

A Classic Ponzi Scheme

Instead of investing the funds as promised, the Adam brothers are accused of using millions of dollars of investor money to pay returns to existing investors in a classic Ponzi scheme structure. They also allegedly used substantial sums to fund lavish personal expenses.

Tanner Adam is accused of using investor funds to make down payments and installments on a $30 million condominium in Miami. Jonathan Adam allegedly spent at least $480,000 of investor money on cars, trucks, and recreational vehicles.

The SEC claims that of the $61.5 million raised, $53.9 million was misused for personal gains, interest payments, finder’s fees, and returning principal to some investors.

The complaint also alleges that Jonathan Adam misrepresented his background to gain investor trust. He reportedly failed to disclose that he had previously been convicted of three counts of securities fraud.

In response to the alleged fraud, the SEC has obtained emergency asset freezes against Jonathan Adam, Tanner Adam, and their respective entities, GCZ Global LLC and Triten Financial Group LLC. These asset freezes aim to prevent further dissipation of investor funds.

Justin C. Jeffries, Associate Director of Enforcement in the SEC’s Atlanta Regional Office, stated, “The SEC will use all tools at its disposal to stop those who exploit the excitement around new technologies to defraud investors.”

The SEC’s complaint charges the Adam brothers and their companies with violating antifraud provisions of federal securities laws.

The agency is seeking permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties against the defendants.

As of the time of the SEC’s announcement, only about $400,000 of investor funds remained in the official accounts associated with the scheme.

The investigation was conducted by the SEC’s Atlanta Regional Office, with Melissa J. Mitchell and Krysta M. Cannon leading the effort under the supervision of Matthew F. McNamara and Justin C. Jeffries.