U.S. Securities and Exchange Commission (SEC) has obtained a freeze on the assets of the “Modern Money Team” (MMT) for allegedly lying to investors and misappropriating funds.
Daniel F. Putnam, Jean Paul Ramirez Rico, and Angel A. Rodriguez are accused of conducting fraudulent activities through two Utah-based companies MMT Distribution, LLC and R & D Global, LLC. They allegedly defrauded investors out of more than $12 million in two cryptocurrency-related schemes, according to the complaint filed in the U.S District Court for the District of Utah.
Putnam is considered to be the mastermind of both operations and in charge of operating a multi level marketing business known as “Modern Money Team”. He is accused of misappropriating collected funds and spending them on a condominium and other personal expenses.
“Through their fraudulent conduct, Defendants have raised at least $12 million from over two thousand investors across the United States and from various countries throughout the world,” it is said in the complaint.
Accordingly, Putnam was in charge of the recruitment of investors, where he was “making material misrepresentations regarding the nature of the investment opportunities and how investment funds would be used”. He managed to recruit around 200 investors. As a result, Putnam raised $3.25 million from the sale of cryptocurrency mining machines.
“Putnam, through Modern Money Team, touted that investors could “purchase mining machines, run them in [Modern Money Team’s facilities], and earn money on the profits each month. According to the Modern Money Team website, investors could purchase “a share in the hashing power of the mining operation” for “as little as $50” on a two-year contract, or could purchase a “complete rig with a lifetime contract” for $2,000,” it is said in the complaint.
In the second scheme, Putnam, Ramirez, and Rodriguez collected additional funds by offering “trading packages” and promising investors high returns on their investments. They promised to investors that they can earn up to 170% returns in a year.
“In reality, as alleged, the defendants misappropriated investor funds for personal use and to make Ponzi-like distributions to earlier investors,” the SEC notes. According to the Commission, Putnam spent more than $100,000 of investors’ funds on a condominium and $33,000 buying a spa.
Ramirez is accused of controlling the account on cryptocurrency exchange Bitfinex, allegedly saying that the account has more than 260 Bitcoins as recently as January 2020. However, the SEC notes that this account never held more than 50 Bitcoins and was closed in May 2019.
“We are either going to retire this year or go to jail,” Putnam texted to Rodriguez in February 2019, according to the Commission. “And I’m [sic] still not sure any of it is real.”
The SEC was successful in obtaining the asset freeze and other emergency relief measures. Additionally, the Commission has requested permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties.