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

According to the SEC's complaint, filed on August 26 in the United States District Court for the Northern District of Georgia, the brothers enticed over 80 investors by claiming their trading bot could generate 13.5% monthly returns. From January 2023 to June 2024, the brothers allegedly told investors that their bot could identify arbitrage opportunities across various crypto platforms, allowing it to buy and sell assets simultaneously to exploit small price differences.

Investors were led to believe that their money would be pooled into a lending fund used to finance flash loans and complete trades, with assets being borrowed and returned within the same blockchain transaction.

However, Justin Jeffries, Associate Director of Enforcement in the SEC’s Atlanta Regional Office, revealed that the scheme was entirely fraudulent. Jeffries explained,

“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.”

The SEC's complaint accuses the brothers of misappropriating $53.9 million of the $61.5 million raised, with most of the funds being used to finance a lavish lifestyle, including the purchase of luxury vehicles and a $30 million condominium. While some investors did receive partial repayments, the majority of the money was allegedly diverted for personal use.

To halt the ongoing fraud, the SEC has secured emergency asset freezes for the brothers' companies, GCZ Global, LLC, and Triten Financial Group LLC. The SEC also claims that Jonathan Adam misrepresented his background, failing to disclose his three prior securities fraud convictions, and falsely assured investors that their investments were nearly risk-free unless a global market collapse occurred.

The SEC has charged Jonathan and Tanner Adam with violating the antifraud provisions of federal securities laws. It is seeking permanent injunctions against their companies, the recovery of all investor funds, and the imposition of civil penalties.

The case comes amidst broader concerns about crypto-related scams. In June, blockchain intelligence firm TRM Labs reported that $7.8 billion was lost to cryptocurrency pyramid and Ponzi schemes globally in 2022.