- SEC charges PGI Global’s Ramil Palafox in $198M crypto fraud, citing Ponzi tactics and misused investor funds.
- PGI Global misled 90K investors via AI trading claims and MLM tactics, with no real trading behind the scenes.
- Palafox faces SEC and DOJ charges, marking a new crypto crackdown under SEC Chair Paul Atkins’ leadership.
Ramil Palafox, founder and operator of PGI Global, is charged with orchestrating a fraudulent investment scheme, which raised nearly $198 million and is the subject of major enforcement action by the U.S. SEC. The filing of the case is the first SEC crypto related case, since newly appointed SEC Chair Paul Atkins took office one day before the filing.
Palafox operated PGI Global from January 2020 through October 2021, according to the complaint filed in the Eastern District of Virginia. The company falsely claimed to be a cryptocurrency and a foreign exchange trading company with guarantees of returns using AI based systems. But according to the SEC, PGI Global carried on little or no actual trading activity and instead operated as a Ponzistyle fraud.
Misuse of Investor Funds and Lavish Spending
The SEC’s complaint alleges that Palafox also misappropriated more than $57 million of investor funds to pay for personal expenses and luxury items for himself. Among these expenditures were the purchase of a Lamborghini, real estate purchases totaling a mansion in Las Vegas, luxury watches and Cartier jewelry valued over $1 million. In addition, PGI Global conducted promotional events in cities like Dubai and Las Vegas to draw in new investors, in the name of a profitable business operation.
The firm also fabricated dashboards, and conducted circular transactions to make it look as though there was still activity, investigators also observed. According to the filing, these methods were supposedly used to mislead investors into believing their funds were yielding high returns, when in fact Palafox mainly moved capital to earlier participants or spent it itself.
Multilevel Marketing Scheme and Regulatory Violations
PGI Global’s business model was based on the use of MLM strategy. Participants were promised commissions for referring new participants, a scheme that kept the operation running until its collapse in 2021. Palafox and the alleged scheme are said to have involved in excess of 90,000 global investors and operated without registering with the SEC or take account of federal securities laws.
Palafox is charged with violating several provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934, including the anti-fraud unregistered securities offering, the complaint says. The regulator alleges that Palafox misappropriated proceeds from the investment ventures and, therefore requests permanent injunctions prohibiting him from engaging in future securities and cryptocurrency marketing ventures and the recovery of misappropriated funds, prejudgment interest and civil penalties.
Criminal Charges Filed Parallel to SEC’s New Enforcement Approach
Palafox is also subject to parallel criminal charges lodged by the U.S. Department of Justice (DOJ) and the civil charges filed by the SEC. It contains wire fraud, money laundering and illegality of monetary transactions. The charges also include that Palafox gave false assurances about PGI’s regulatory compliance and profitability, and failed to invest client funds as promised.
This is a firm case against clear financial fraud, but the recent shift in the SEC’s approach under new leadership indicates a far broader one. Since Chair Atkins came into office, the agency has thrown out some high profile crypto enforcement actions against firms like MetaMask, ConsenSys, and Crypto.com.
