California: 11 crypto companies targeted as Ponzi

In California, the Department of Financial Protection and Innovation (DFPI) has intervened by targeting 11 crypto companies as they are referred to as Ponzi and Pyramid schemes. 

California and crackdown on 11 scam crypto companies

The Department of Financial Protection and Innovation (DFPI) issued a press release announcing that it has issued orders against 11 different cryptocurrency-powered entities for violations of California securities laws.

We’ve issued orders against 11 companies for violations of CA securities laws.

“These actions protect consumers & ensure California remains the premier global location for responsible crypto asset companies to start & grow,” says Commissioner Hewlett. https://t.co/FVMSNilJXc pic.twitter.com/iEVy5CTxEh

— Ca Department of Financial Protection & Innovation (@CaliforniaDFPI) September 27, 2022

“We’ve issued orders against 11 companies for violations of CA securities laws.

“These actions protect consumers & ensure California remains the premier global location for responsible crypto asset companies to start & grow,” says Commissioner Hewlett.”

More specifically, nine of these companies allegedly solicited funds from investors to trade cryptocurrencies on behalf of investors, while one allegedly solicited crypto assets to develop metaverse software and another claimed to be a decentralized finance platform, or DeFi.

These are 11 businesses referred to by DFPI as Ponzi schemes, since funds raised from investors were used to pay alleged profits to other investors, and also as Pyramid schemes, since each company offered a referral program. 

California: names of the 11 crypto companies targeted by the DFPI

Following the press release, the DFPI lists the names of the 11 crypto companies with Ponzi and Pyramid schemes, which developed in the areas of cryptocurrency trading, DeFi, and metaverse software development. Here are their names: 

• Cryptos OTC Trading Platform Limited or COTP;

• GreenCorp Investment LLC; 

• Metafiyielders Pty Ltd d/b/a Metafi Yielders; 

• World Over the Counter Limited or World OTC.

In this regard, DFPI Commissioner Clothilde Hewlett said:

“The DFPI will continue to protect California consumers and investors from crypto scams and frauds. These actions not only protect consumers, but also ensure California remains the premier global location for responsible crypto asset companies to start and grow.”

This type of company is one that had already invaded the web since 2018, after the first ATH (All Time High) of Bitcoin at $20,000 and the advent of ICOs (Initial Coin Offerings): HYIPs.

Basically, HYIPs are real investment frauds that promise low-risk, overly large high returns by providing little or fake details about the team managing the investment. 

California’s new legislative framework on cryptocurrencies

This action by the DFPI is a consequence of what happened last May 2022, when California Governor Gavin Newsom had signed the executive order to officially build a framework for the use of crypto in the country.  

That cryptocurrency legislative framework sees the DFPI itself tasked with initiating enforcement actions to stop violations of consumer financial laws and to raise awareness among Californians about the benefits and risks associated with crypto-related products and services. 

Not only that, the Office of Business and Economic Development (GO-Biz) is also called upon to work with DFPI, along with the Business, Consumer Services and Housing (BCSH) Agency. 

The executive order issued in May in California is in line with the Biden administration’s March proposal to examine the risks and benefits of crypto. 

Crypto and Ponzi schemes: the link to Jamie Dimon, CEO of JP Morgan

Recently, in a hearing before the US Congress, Jamie Dimon, CEO of JP Morgan Chase, said that in his opinion “crypto are decentralized Ponzi schemes.”

Yet another criticism against crypto by the confused CEO of JP Morgan who, some time ago, had gone so far as to claim that Bitcoin was worthless and questioning the limited supply of the queen of cryptocurrencies, indicating that the number of BTC in circulation would be more than the 21 million BTC claimed by the protocol. 

Yet despite this aversion to the crypto world, Dimon appears to be a big fan of blockchain and decentralized finance. Indeed, because while criticism is pouring in, business is being done with the “enemy.” 

In fact, the world’s largest investment bank has minted its own digital currency, JPM Coin, and opened a lounge in the metaverse. 

The evolution of scams: from call centers to web platforms

While California takes action against Ponzi and Pyramid schemes, and JP Morgan’s CEO makes his statements adverse to the crypto world even though he operates in the industry, it is worth noting how scams have evolved from call centers to web platforms. 

For that matter, it does indeed appear that the system has changed: whereas before it was call centers and TVs that were spreading scams, in the style of Wanna Marchi, now everything has become smarter and more technological and, in some ways, even easier for scammers. 

By analyzing the work behind HYIPs, all it takes is a website, two or three influencers in the industry (often without their knowledge), and a more or less credible project, and that’s it.

In this sense, according to data on scams in 2021 globally, it seems they returned about $6.2 billion to their perpetrators, while in the first 8 months of 2022, the same figure seems to be higher, despite the long crypto winter.