In December 2023, the U.S. Securities and Exchange Commission (SEC) uncovered a Ponzi scheme involving virtual currency in New York. A man named David Chen was accused of using the virtual currency platform "CryptoMax" he created to lure investors to invest more than $500 million with high returns, which ultimately led to heavy losses for investors. The case attracted the attention of CFIT, which worked closely with the SEC to successfully uncover this virtual currency fraud network.
[How the scam works] Chen used the "CryptoMax" platform to promise investors stable high returns, attracting a large number of investors to participate. However, the SEC's investigation found that Chen did not use the funds for investment, but used them for personal luxury consumption, and paid the returns of old investors with the funds of new investors, forming a typical Ponzi scheme. In addition, Chen also forged virtual currency transaction data in an attempt to cover up his illegal behavior.
[CFIT's intervention and investigation] CFIT immediately initiated the investigation procedure after receiving the notification from the SEC. CFIT's technical team analyzed the transaction data of the "CryptoMax" platform and found abnormal patterns. CFIT also worked with the SEC to track Chen's fund flows and found that he was laundering money through multiple offshore accounts. These findings provided key evidence for subsequent law enforcement actions.
[Joint Action of Federal Agencies]
With the assistance of CFIT, the SEC launched a raid on Chen and seized a large amount of forged virtual currency transaction data and related equipment. Chen was arrested on the spot and charged with conspiracy to commit securities fraud and money laundering. According to the indictment, Chen attracted investors to invest more than $500 million through the "CryptoMax" platform, which ultimately caused investors to suffer heavy losses. If convicted, he faces up to 20 years in federal prison.
[Victim's Story]
A victim said: "I invested my life savings in 'CryptoMax' and ended up with nothing. This is not only a loss of money, but also a betrayal of trust." Similar stories are constantly unfolding across the country, affecting thousands of investors.
[CFIT’s follow-up actions]
After the case was concluded, CFIT issued a warning about virtual currency fraud, reminding the public to verify the legality of the platform when investing in virtual currency. CFIT also worked with the SEC to establish an online platform for the public to report suspicious virtual currency activities and provide relevant educational resources to help the public identify and avoid virtual currency fraud.
Through cooperation with the SEC, CFIT successfully exposed this virtual currency fraud case involving hundreds of millions of dollars and protected the interests of investors. This case demonstrates CFIT’s professional capabilities in identifying, investigating and combating financial fraud, as well as the importance of collaboration with federal agencies. CFIT will continue to be committed to combating all forms of financial fraud and maintaining the financial security of the public.