Ramil Palafox, a 59-year-old Las Vegas-based entrepreneur, has been accused by the US Securities and Exchange Commission (SEC) of running a $200 million Ponzi scheme through his company, PGI Global. The scheme, which operated from January 2020 to October 2021, promised investors daily returns of 3% and claimed to use AI-powered trading.
The Scheme
Palafox and his network offered investment packages that could be paid in Bitcoin or traditional currency. However, instead of investing the funds, Palafox allegedly diverted over a quarter of the money to personal expenses, including luxury properties, high-end cars, and other costly items. The SEC reported that he spent at least $57 million on personal purchases, such as Lamborghinis and real estate.
The scheme worked by using funds from new investors to pay earlier investors, a classic Ponzi tactic. This ultimately left over 90,000 people worldwide financially harmed.
Legal Action
Palafox faces 23 charges in a Virginia court, including eight related to wire fraud. The Department of Justice (DOJ) is seeking a prison sentence of 9 to 11 years, as well as the recovery of misappropriated funds and civil penalties. The DOJ is also pursuing compensation from Palafox’s family members, including his wife, Marissa Mendoza Palafox, and his brother-in-law, Darvie Mendoza.
The SEC’s case against Palafox highlights the risks investors face in the largely unregulated crypto market. Laura D’Allaird, director of the SEC’s Emerging Technologies Unit, stated that Palafox used the “façade of innovation to enrich himself, deceiving thousands with false promises of expert knowledge and an AI-powered trading platform.”
Implications for the Crypto Market
The case serves as a warning to investors to be cautious of guaranteed returns, particularly in volatile markets like cryptocurrency. US authorities continue to emphasize the importance of financial education and due diligence before investing in any crypto-related proposals. The SEC is maintaining its vigilance over fraud related to digital assets, even as it adopts a more conciliatory approach under the current administration.