SEC Sues Crypto Executive Over Alleged $198 Million Scheme

On Tuesday, the U.S. Securities and Exchange Commission formally charged PGI Global CEO Ramil Palafox for allegedly running a $198 million crypto-based Ponzi scheme five years ago, accusing him of duping investors with false promises of AI-driven trading and guaranteed returns. 

More than $57 million of those funds in fiat and Bitcoin were misappropriated for Palafox’s personal use and to benefit his close associates, the SEC alleged in a statement.

The case against Palafox, filed in the U.S. District Court for the Eastern District of Virginia, is the SEC’s first crypto-related enforcement action under new Chair Paul Atkins, who was sworn in just a day earlier.

Palafox ran PGI Global, short for Praetorian Group International, as a front for unregistered securities sales cloaked in crypto industry buzzwords, according to the SEC’s complaint.

From January 2020 to October 2021, Palafox marketed “membership packages” that allegedly guaranteed returns of up to 200% via a supposed AI-driven crypto and forex trading platform.

Formally known as PGI Global UK Ltd, the crypto trading firm was shut down by the U.K. High Court in September 2022 for operating a fraudulent investment scheme.

Between July 2020 and February 2021, PGI Global collected approximately £612,425 (US$815,000) from investors.

However, when the promised returns failed to materialize, investors were unable to withdraw their funds.

Palafox, based in the U.S., did not cooperate with the investigation. The U.S. Department of Justice and the U.S. Department of the Treasury seized the company’s website after a warrant was issued by the U.S. District Court for the Eastern District of Virginia.

“PGI Global never had an ‘Auto Trading’ platform and was conducting little to no trading of any kind on investors’ behalf,” the court filing reads.

Instead, investor funds were allegedly used to sustain a Ponzi-like system of payouts and to finance Palafox’s extravagant lifestyle, which includes a $1.7 million home in Las Vegas, multiple Lamborghinis, and $1.18 million in Cartier jewelry. 

The complaint outlines how Palafox reportedly faked crypto activity through circular transactions and manipulated dashboards to falsely show returns and keep investors hooked.

“His false claims of crypto industry expertise and a supposed AI-powered auto-trading platform were just masking an international securities fraud,” Laura D’Allaird, chief of the SEC’s Cyber Unit, said in the statement.

The SEC also claims Palafox transferred assets in anticipation of the scheme’s collapse. 

The complaint names four relief defendants, including Palafox’s wife, mother, and brother-in-law, and seeks the return of assets and funds they received, such as a $320,000 mortgage payoff, a Range Rover, and luxury goods from Louis Vuitton and Hermès.

The agency is also asking the court to impose a permanent ban on Palafox’s participation in crypto or MLM-related securities offerings, along with civil penalties and the full disgorgement of funds, while federal prosecutors have also indicted him in a related criminal case out of Virginia.

Edited by Sebastian Sinclair