Banking and Finance Law Daily Promoters of cryptocurrency chain referral scheme fined, banned from industry
News
Friday, August 23, 2019

Promoters of cryptocurrency chain referral scheme fined, banned from industry

By Colleen M. Svelnis, J.D.

An FTC action against a recruitment-based cryptocurrency scheme resulted in a Florida district court permanently banning its creators from operating or participating in any multi-level marketing programs, along with monetary relief.

Under an order from District Court for the Southern District of Florida, a permanent injunction will be instituted against four individuals who ran a cryptocurrency "chain referral" scheme, along with a judgment of equitable monetary relief. According to the Federal Trade Commission, who began the action against Thomas DlucaEric PinkstonLouis Gatto, and Scott Chandler, the individuals marketed their scheme under the names Bitcoin Funding Team and My7Network, falsely promising consumers that they could earn large returns through such cryptocurrency as bitcoin. Under the settlements, Dluca must pay $453,932, and Chandler must pay $31,000. Pinkston also agreed to a $461,035 judgment, which will be suspended upon payment of $29,491, due to his inability to pay the full amount.

The injunction permanently prohibits the individuals from operating, participating in, or assisting others in promoting or operating any multi-level marketing program, pyramid, Ponzi, or chain referral scheme. Dluca, Pinkston, Gatto, and Chandler are also prohibited from misrepresenting as part of a business venture or investment opportunity the amount of income that participants will receive or other aspects of the business venture or investment opportunity.

Chain referral scheme. According to the FTC’s complaint, filed in February 2018, the defendants promoted their programs as a means for consumers to generate income and accumulate wealth by purchasing and donating bitcoin currency to earlier "upline" participants and by recruiting others to do the same. The defendants purportedly promised big rewards for a small payment of bitcoin or Litecoin. The programs essentially amounted to pyramid schemes, according to the complaint because Bitcoin Funding Team and My7Network participants could only generate revenue by recruiting new participants and convincing them to also pay cryptocurrency (see Banking and Finance Law Daily, March 16, 2019).

Companies: Bitcoin Funding Team; My7Network

MainStory: TopStory Blockchain EnforcementActions FinTech FloridaNews UDAAP

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More
Banking and Finance Law Daily

Banking and Finance Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on banking and finance legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.

Free Trial Learn More