Daniel Chartraw of South Lake Tahoe, California was recently indicted on wire fraud charges alleging that through his companies Crypto-Pal LLC and TDA Global he scammed investors who he lured by claiming to have developed a proprietary algorithm capable of generating exceptional returns on cryptocurrency investments. According to the indictment, Chartraw failed to invest the money, but instead used it to fund his personal lifestyle.
Investment scams in general are a huge problem. According to the FTC in 2023 consumers lost $4.6 billion to investment scams and cryptocurrency investment scams accounted for $3.96 billion.
Interest in cryptocurrencies as an investment has been aided by President Elect Trump’s championing of it and promising to make the United States the “crypto capital of the planet” as well as his appointments of cryptocurrency proponents to significant positions in his upcoming administration including Paul Atkins who Trump has nominated to become the chair of the Securities and Exchange Commission.
With cryptocurrencies reaching record highs, including Bitcoin reaching a price of $100,000 in early December, many people are attracted to cryptocurrencies as an investment even when they may not know much about cryptocurrencies. FOMO or fear of missing out is a motivating factor with some people investing before they take the opportunity to educate themselves to cryptocurrency investing in general and the particular cryptocurrency investment they are considering in particular. Cryptocurrency investments present the perfect storm for scammers by appearing to offer the opportunity to make a lot of money while being complicated and not closely regulated.
In 2023 Michael Ackerman was convicted in federal court of operating a cryptocurrency scam in which he and two partners scammed investors out of 30 million dollars by falsely claiming that his cryptocurrency investment fund would produce monthly returns of more than 15%. Ackerman told his investor-victims that he had developed a unique algorithm that allowed him to invest and trade in cryptocurrencies including Bitcoin and earn tremendous profits. In particular, Ackerman targeted physicians as investors/victims who were contacted by one of his partners who was a physician. The truth is that Ackerman never delivered on his claims, falsified records that he used to lure investors to make it appear that his fund was profitable when it was not, and stole much of the money invested to fund his own lavish lifestyle.
Many of the cryptocurrency scams such as the scam perpetrated by Ackerman promise profits that are far too good to be true which should always be a reason for skepticism. Many of these scams are promoted on social media which should not be considered a place to go for legitimate investment advice.
And if cryptocurrencies were not complicated enough, Scammers also often lure people into their cryptocurrency investment scams with claims that they use artificial intelligence to generate huge returns using bots, trade signal algorithms, crypto-asset arbitrage algorithms, and other AI-assisted technology. Early last year the Consumer Futures Trading Commission issued a warning to consumers to be wary of these claims.
SO HOW DO YOU PROTECT YOURSELF?
Before investing with anyone, you should investigate the person offering to sell you the investment with the Securities and Exchange Commission’s Central Registration Depository. This will tell you if the broker is licensed and if there have been disciplinary procedures against him or her. Anyone considering investing with Chartraw who looked into his past would have found that he was convicted of wire fraud connected to an investment fraud scheme in 2013.
You can also check with your own state’s securities regulation office for similar information. Many investment advisers will not be required to register with the SEC, but are required to register with your individual state’s securities regulators. You can find your state’s agency by going to the website of the North American Securities Administrators Association.
You should also check with the Financial Industry Regulatory Authority (FINRA) for information about the particular investment adviser.
As for Cryptocurrency investing, it is important to remember that you should never invest in something that you do not completely understand. Cryptocurrency scams quite often involve complicated language and investment terms that are purposefully unclear in an effort to confuse potential investors from understanding the real facts.
Finally, you may want to check out the SEC’s investor education website at www.investor.gov.
Scammers can be very convincing and they may sound like they are offering a great opportunity for someone to make some money, but you must be careful that the person making money is not the scam artist taking yours.
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