SEC charges Adam brothers in $60 million crypto Ponzi scheme

The United States Securities and Exchange Commission (SEC) has charged two brothers, Jonathan and Tanner Adam, for allegedly running a $60 million Ponzi scheme centered around a non-existent crypto trading bot.

According to the SEC’s complaint, filed on August 26 in the U.S. District Court for the Northern District of Georgia, the brothers duped over 80 investors by promising 13.5% monthly returns through their fraudulent crypto bot.

The SEC claims the Adam brothers lured investors from January 2023 to June 2024, assuring them that their bot could identify arbitrage opportunities in the crypto market, buying and selling assets simultaneously to exploit small price differences across platforms.

Investors were told their funds would be pooled to facilitate flash loans and complete trades, with borrowed assets being returned within the same blockchain transaction.

Justin Jeffries, Associate Director of Enforcement in the SEC’s Atlanta Regional Office, stated that the trading scheme was entirely fictitious, with the bot never existing.

Of the $61.5 million raised from investors, the SEC alleges that $53.9 million was misappropriated by the brothers to finance their extravagant lifestyles, including the purchase of cars, trucks, and a $30 million condominium.

Jeffries further commented, “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.”

To stop the fraudulent activities, the SEC has secured emergency asset freezes for the brothers' companies, GCZ Global, LLC, and Triten Financial Group LLC.

The SEC also claims that the Adams brothers misrepresented the risks of investing, suggesting that the only risk was a global market collapse, which they described as "virtually nonexistent."

Additionally, the SEC alleges that Jonathan Adam concealed his background, failing to disclose three previous securities fraud convictions to potential investors.

The SEC’s charges include violations of the antifraud provisions of federal securities laws, and the agency is seeking permanent injunctions against the brothers and their companies, as well as the return of all investor funds and civil penalties.

This case highlights the ongoing issue of cryptocurrency-related fraud, with TRM Labs reporting that in 2022 alone, $7.8 billion was lost to cryptocurrency pyramid and Ponzi schemes worldwide.