The United States Federal Trade Commission, an independent government agency tasked to protect American consumers, filed a lawsuit against Bitcoin Funding Team and My7Network – businesses the FTC claims operates digital currency pyramid schemes. At FTC’s request, both companies have been shut down by a federal court due to their promotion of “deceptive chain-referral schemes”. According to the FTC, Bitcoin Funding Team and My7Network utilized popular social media sites such as YouTube and Twitter to promote and promise users that they will receive a monthly income of $80,000 by merely placing a $100 initial entry fee. According to the FTC’s Bureau of Consumer Protection director, Tom Pahl, the scheme was specially designed to make those at the top of the pyramid richer “at the expense of everyone else”.
Chain referral scams is where would-be participants are required to pay an entry fee upfront prior to recommending others to join in. Though a humongous $80,000 was promised to users per month, payouts did not equate to the amount advised. FTC’s lawsuit allege that approximately 30,000 people all over the world were duped by Bitcoin Funding Team and My7Network. A federal court in Florida froze the assets of the individuals involved in the scam. The lawsuit accuses Thomas Dluca, Louis Gatto, and Eric Pinkston of using websites and social media to make people believe that parting with their $100 will result to a $80,000 monthly windfall. Meanwhile, a fourth person – Scott Chandler – allegedly promoted Bitcoin Funding Team and My7Network through conference calls, other than via social media. Unknowing participants to the scheme were required to pay via litecoin and bitcoin. However, most of the investors were not able to recover their initial investment. Pahl highlights the FTC’s role in such situations and assures the public, “(it) will remain vigilant regardless of the platform — or currency used.”