SEC, Feds Charge Man in $200M Crypto Scam

According to a statement from the SEC on April 22, Palafox — a dual citizen of the U.S. and the Philippines — misappropriated over $57 million of investor funds through his company, PGI Global, from January 2020 to October 2021. The SEC alleges that he operated a Ponzi-like scheme using a multi-level marketing model until the company collapsed in 2021.

The SEC said Palafox misled investors with false claims of cryptocurrency expertise and a supposed AI-powered automated trading platform. To attract more participants, he hosted lavish events in Dubai and Las Vegas and offered generous referral commissions to those who recruited new members. Investor funds were used not only to pay earlier investors but also to finance his own luxurious lifestyle, including purchasing luxury cars, expensive watches, and real estate.

“Palafox lured investors with promises of guaranteed profits from sophisticated crypto and forex trading. But instead of actually trading, he spent millions of investor dollars on luxury items for himself and his family,” said Scott Thompson, Associate Director of the SEC’s Philadelphia office.

The SEC has charged Palafox with violating federal securities laws, specifically anti-fraud and registration provisions. The Commission is seeking a permanent injunction to bar him from future involvement in the sale of securities or crypto assets, as well as the return of ill-gotten gains and civil penalties.

Department of Justice Launches Parallel Criminal Case

Alongside the SEC’s civil lawsuit, the U.S. Attorney’s Office for the Eastern District of Virginia has filed criminal charges against Palafox. According to a sealed indictment dated March 13, he has been charged with wire fraud, money laundering, and conducting unlawful financial transactions.

Prosecutors allege that Palafox promised daily returns of 0.5% to 3% through Bitcoin trading and concealed critical information about PGI’s profitability, licenses, and business operations. The indictment also says he told investors that the company’s traders could generate profits regardless of whether Bitcoin’s price rose or fell — a claim federal prosecutors deem entirely false. In reality, most investor funds were never used to purchase or trade Bitcoin, and many investors lost part or all of their money.

Assets listed in the indictment that Palafox would be required to forfeit if convicted include over $1 million in cash, 17 vehicles (including two Teslas, a Ferrari 458 Special, two Lamborghinis, and two Porsches), along with numerous designer bags, wallets, shoes, jewelry, and watches.

Several affiliated companies were implicated in the scheme, including Praetorian Group International Trading Inc., whose website was seized by the Department of Justice in 2021. This action led to the shutdown of its UK-based operations by the UK High Court.

This is the SEC’s first crypto-related enforcement case under its new crypto-friendly chair, Paul Atkins, who was sworn in on April 22. Earlier in January, the SEC had brought a case against Nova Labs for offering unregistered securities via devices that mined Helium tokens. That lawsuit was settled in April, with Nova Labs agreeing to pay a $200,000 civil penalty and the case being dismissed.