SEC Charges Brothers Over Alleged $61 Million Ponzi Scheme That Defrauded Investors

Two brothers accused by the U.S. Securities and Exchange Commission (SEC) of operating a $61 million Ponzi scheme have reached an agreement with the agency and will repay more than 80 investors they defrauded in the United States.
As well as charging the brothers, the agency also froze their assets.
One day after the SEC filed its complaint, the brothers agreed to consent judgments to resolve the case.
The two brothers also agreed not to take part in any scheme to defraud or obtain money or property through untrue statements or manage investments for any clients.
The exact amount of fines the brothers will pay will be determined by the SEC at a later date, the judgments state.
In its complaint, the SEC alleged that from January 2023 to June 2024, the Adam brothers jointly lured in victims—via calls and video conferences—by promising them monthly investment returns of at least 8 percent and up to 13.5 percent via an automated software bot that operated on a crypto asset trading platform to identify arbitrage trading opportunities.
According to the regulatory body, the brothers told victims that the investor funds would be used in a lending pool that would, via smart contracts, fund “flash loans” to complete arbitrage trades.
The Adam brothers assured investors that their funds were safe, the SEC said.
The so-called lending pool and the bot did not exist, and the brothers spent the majority of the $61.5 million raised on maintaining their lavish lifestyles, according to the SEC.
While some of the money was given back to investors as returns, approximately $53.9 million was misspent on items such as expensive vehicles and apartments, the SEC alleges.
The complaint alleges that Tanner Adam used the funds to make the down payment and installments to build a $30 million condominium in Miami.
Jonathan Adam used at least $480,000 of investor funds to purchase cars, trucks, and recreational vehicles, the agency said.
The brothers also allegedly spent more than $1.8 million of investor funds to build houses in Texas for their family members.
The agency further alleged that Jonathan Adam misrepresented his background to gain the trust of investors and failed to inform them that he had previously been convicted in 2004 of three counts of securities fraud including engaging in business as a broker-dealer or agent without registration, and unlawful sale of unregistered securities.
Following that conviction, he was sentenced to 50 months in prison and ordered to pay $314,500 in restitution, according to the SEC’s complaint.
In its complaint, the agency said it is seeking permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties against the brothers.
“The SEC will use all tools at its disposal to stop those who exploit the excitement around new technologies to defraud investors,” the associate director of enforcement in the SEC’s Atlanta Regional Office, Justin C. Jeffries, said in a statement.
The Epoch Times contacted legal representation for the Adam brothers but didn’t receive a reply by publication time.