On March 16, the FTC announced that a U.S. District Court for the Southern District of Florida granted a temporary restraining order against four individuals who allegedly promoted cryptocurrency “chain referral schemes” in violation of the FTC Act. According to the complaint, the defendants falsely promised that by paying a small sum in virtual currency to enroll, such as bitcoin or Litecoin, the participant could earn significant returns. Three of the defendants promoted schemes that claimed participants could turn $100 into $80,000 in monthly income based on recruiting additional participants, when in actuality most of the participants failed to recoup their initial investments. Additionally, the fourth defendant promoted another scheme, which promised virtual currency investors a fixed rate of return on bitcoin investments in a passive investment operation and a multilevel investment program which participants would receive a commission for recruiting more investors. The scheme allegedly ended within two months of opening and many investors failed to recover the initial investments.
On the same day, the FTC announced a new FTC Blockchain Working Group, which will (i) “build on FTC staff expertise in cryptocurrency and blockchain technology through resource sharing and by hosting outside experts”; (ii) “facilitate internal communication and external coordination on enforcement actions and other related projects”; and (iii) “serve as an internal forum for brainstorming potential impacts on the FTC’s dual missions and how to address those impacts.” The announcement highlighted the properties of cryptocurrencies that make the payment form susceptible to scammers, including the fact that it can be transferred electronically without requiring validation from a trusted third party source.