One of the leaders of a Ponzi scheme that involved a fictitious cryptocurrency has been ordered to pay $74m in fines.
The judgment comes more than a year and a half after the SEC raided the offices of a company called US Fine Investment Arts Inc (USFIA), said to be connected to the scheme. Gemcoin was alleged to be tied to amber mine holdings owned by USFIA, effectively acting as a value-add to precious stones customers believed they would receive.
Yet, the SEC went on to argue in court that the venture was largely fraudulent, and that CEO Steven Chen had diverted most funds to unrelated shell companies. These shell companies are believed to hold most of the ill-gotten gains and are listed as co-defendants by the SEC.
According to a judgment handed down on Monday, Chen and a cluster of related entities – including two real estate trusts, a consulting business and a golf course holding company – were ordered to pay $51.9m in disgorged profits. The court also left Chen on the hook for $3.8m in prejudgment interest, as well as a civil penalty worth $16.7m.
Whether the SEC's successful case against Chen and USFIA represents the last of the Gemcoin story, however, remains to be seen.
Among the details put forward in past court filings, including a $100m class-action lawsuit, was the allegation that persons tied to the Gemcoin scheme had shifted their resources elsewhere, suggesting that recovery efforts for affected investors could stretch on for some time.
Past reports also indicate that the Federal Bureau of Investigation (FBI) has been investigating Gemcoin, though it's not immediately clear if the agency has any grounds to file any charges.
Image via Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.