FTC introduces new blockchain working group – tracks down misleading cryptocurrency schemes

There is probably no cryptocurrency that hasn’t fallen prey to scams, hacks or deceivers. The Federal Trade Commission [FTC] recently announced a lawsuit against four individuals who allegedly promoted one or more fraudulent “chain referral schemes”. The lawsuit was filed because these alleged schemes used Bitcoin, a giant in the cryptocurrency market.

The FTC had requested the federal court to take action against such allegations, for which the court halted the activities of four individuals who were allegedly promoting deceptive money-making schemes which involved cryptocurrencies. They trapped people by falsely promising the participants big gains in return to the cryptocurrencies like Bitcoin or Litecoin, which were paid as enrollment fees.

Thomas Dluca, Louis Gatto, and Eric Pinkston where the three defendants who were promoting chain referral schemes called Bitcoin Funding Team and My7network using websites, YouTube videos, social media and conference calls. They created revenue only by recruiting new participants and convincing them to pay the enrollment fee.

Tom Pahl, Acting Director of the FTC’s Bureau of Consumer Protection said:

“The FTC will remain vigilant regardless of the platform or currency used. The schemes promoted by them were designed to enrich those at the top at an expense of everybody else.”

As requested by the FTC, the court has issued a temporary restraining order and frozen the defendants’ assets.

What is Cryptocurrency Technology?

Cryptocurrency technology allows every individual to transfer blocks of currencies electronically. They can verify to a second party without having to depend on a 3rd person, agent or a bank. The values of these currencies keep fluctuating from hundreds to even thousands of dollars. The privacy and security are because of the sophisticated software techniques like blockchain and encryptions.

FTC is the primary federal general consumer protection agency which has observed such patterns before. Tweets and comments on Twitter are always spammed with such scams in form of giveaways and other contests which attracts a large audience base who fall for them and end up losing their assets.

The lawsuit announced, identifies and targets such schemes while, cryptocurrencies and related technologies will affect the FTC’s broader consumer protection and competition missions in at least five other ways: Payments, New Schemes, Defendants’ Assets, Competition Policy and New Solutions.

The FTC Blockchain Group

An internal FTC blockchain workgroup has been created as a defense to the after-effects of the developments to the FTC’s work. This group enhances the significant work already done by the FTC and they have at least 3 goals.

  1. Build on FTC staff expertise in cryptocurrency and blockchain technology through resource sharing and by hosting outside experts.
  2. Facilitate internal communication and external coordination on enforcement actions and other related projects.
  3. Serve as an internal forum for brainstorming potential impacts on the FTC’s dual missions and how to address those impacts.

FTC tweeted a few hours ago supporting the announcement:

“Through the FTC’s 100 years of consumer protection, the agency has often seen old schemes dressed up in the clothes of fancy new technologies. But in addition to old-frauds-with-new-looks, cryptocurrencies and blockchain technology likely will affect the FTC’s broader consumer protection and competition missions in at least five other ways.”

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