The US Department of Justice announced that, as a result of an investigation into a major global cryptocurrency fraud, the person who managed the scheme that caused investors more than 200 million dollars in losses was sentenced to 20 years in prison. The fraud in question resulted in the victimization of more than 90 thousand investors.
Global Scam Perpetrated by the Company Through Crypto
Ramil Ventura Palafox, founder, chairman and CEO of Praetorian Group International, raised investments through a multi-layered marketing structure that promised high returns through Bitcoin-focused investments and crypto asset trading. According to court documents, it was determined that the company received a total of $ 201 million in investments from around the world between December 2019 and October 2021. Participants were promised daily earnings ranging from 0.5 to 3 percent. It has been claimed that these returns are driven by smart Bitcoin arbitrage and advanced crypto trading methods.
In the investigations of the authorized institutions, it was revealed that the company did not trade at the promised rates and the system operated with the logic of a classic pyramid scheme, paying the old participants with the funds of new investors. Approximately 30.2 million dollars of the investments were made in fiat currency, 8,198 in Bitcoin and a total of 171.5 million dollars in crypto assets.
Investor Portal, Luxury Expenditures and Personal Use of Funds
It was stated that Palafox created an online portal that displayed fake profit statements on the platform in order to maintain the trust of investors for a long time. It was stated that during the period between 2020-2021, this portal was full of fake balance sheets presented to investors as if they were stable returns that were not actually obtained.
The file submitted to the court stated that Palafox used investors’ funds to finance his luxurious life. In particular, it was determined that close to 3 million dollars was spent on luxury vehicles, 329 thousand dollars on upper segment hotel apartments and the purchase of four residences with a total value of more than 6 million dollars. In addition, it was determined that approximately $3 million was paid for high amounts of designer clothes, jewelry, watches and decorative items. Additionally, it was claimed that $800 thousand in cash and 100 Bitcoins worth $3.3 million at that time were transferred to the family member.
In mid-2021, the system began to collapse as the company’s website closed and withdrawal requests accumulated. It was recorded in the court record that Palafox, who resigned as CEO in September 2021, retained control of the company accounts for a while.
Parallels with FTX and Emerging Fraud Trends in the Industry
The incident is similar to the FTX bankruptcy experienced in the industry in the past. In both cases, investors were promised unrealistically high returns and the capital collected was spent for personal or other purposes. For example, Palafox used investor money with expenses from luxury cars, real estate, and famous brands; FTX’s founder similarly exploited investor trust with risky investments, property purchases and political donations.
In both examples, investors are distracted by unreal gains while company managements mask the collapse of the system for a long time. As a result, the size of the loss in Praetorian Group International was determined to be at least 62.7 million dollars, while there was a loss of billions of dollars in FTX. Both incidents caused the prosecutor’s office in the USA to approach financial fraud attempts related to cryptocurrencies more carefully.
