SEC Cracks Down on $198M Crypto Scam—Because Some ’Geniuses’ Still Think Ponzi Schemes Work in 2025

The hammer drops—again. Another week, another nine-figure crypto fraud unraveled by regulators. This time? A classic Ponzi wrapped in blockchain buzzwords, promising moon shots but delivering exit scams. Victims bought the hype; the SEC just bought them a one-way ticket to litigation town. Bonus lesson: If your ’yield farming’ strategy relies on recruiting more bagholders than actual farming, maybe rethink your life choices.

$198M Ponzi Scheme Exposed

The SEC’s complaint detailed that Palafox sold “membership” packages that promised high returns from PGI Global’s supposed trading operations, while also offering multi-level marketing-style referral incentives to encourage new investors.

In reality, Palafox misappropriated over $57 million of the investor funds for personal expenses, including luxury items such as Lamborghinis. The majority of the remaining funds were used to pay returns to earlier investors in a classic Ponzi scheme until it collapsed in late 2021.

Scott Thompson, Associate Director of the SEC’s Philadelphia Regional Office, stated,

“As alleged in our complaint, Palafox attracted investors with the allure of guaranteed profits from sophisticated crypto asset and foreign exchange trading, but instead of trading, Palafox bought himself and his family cars, watches, and homes using millions of dollars of investor funds.”

Laura D’Allaird, Chief of the SEC’s Cyber and Emerging Technologies Unit, described Palafox’s actions as using the allure of crypto industry innovation to deceive investors and masking a large-scale securities fraud.

The SEC’s complaint, which was filed in the US District Court for the Eastern District of Virginia, has charged Palafox with violations of federal anti-fraud and registration provisions. It seeks to prevent him from participating in multi-level marketing programs, demands the return of ill-gotten gains, and calls for civil penalties.

Additionally, the complaint names several relief defendants, including BBMR Threshold LLC and individuals tied to Palafox, seeking disgorgement of their ill-gotten funds. Palafox is also facing criminal charges, with a parallel case brought by the US Attorney’s Office for the Eastern District of Virginia.

Crackdown in the UK

In 2022, the UK High Court shut down PGI Global’s UK division for allegedly running a fraudulent scheme that promised investors returns of up to 200%. The firm claimed to offer profitable digital asset investments but failed to deliver on its promises.

Authorities determined that PGI Global had stolen over $700,000 from users, with executives diverting $225,000 to personal accounts and spending $11,500 on luxury items. Meanwhile, Palafox reportedly refused to cooperate with the investigation.