Judge Backs FTC Asset Freeze in Crypto Fraud Case

The Federal Trade Commission (FTC) is seeking to permanently freeze the assets of four men accused of running cryptocurrency referral scams.

The U.S. regulator also asked a federal court in Florida to order the defendants to stop working together or creating new business entities. Further, they would have to provide a list of their assets to the FTC if the proposed injunction is enforced.

As previously reported, the FTC sued the four individuals in the Florida court earlier this month, accusing them of promoting fraudulent referral investment schemes. At the time, the agency said that “this case shows that scammers always find new ways to market old schemes.”

U.S. Magistrate Judge Lurana Snow recommended that the court grant FTC’s motion for a preliminary injunction in a court report dated March 23.

“Based on the argument of the plaintiff’s counsel and evidence presented, the Court is persuaded that Plaintiff is likely to succeed on the merits and that injunctive relief is in the public interest,” Snow wrote. The motion still has to be approved by District Judge K. Michael Moore, however.

The motion followed a temporary restraining order, which Snow also supported, that provisionally froze the assets of My7Network and the Bitcoin Funding Team, as well as Thomas Dluca, Louis Gatto, Eric Pinkston and Scott Chandler.

According to the filing, Snow’s report and recommendation followed a public hearing that the defendants did not attend.

The proposed injunction accuses the defendants of acting deceptively, stating:

“Based upon the [evidence] submitted by the FTC, there is good cause to believe that Defendants Dluca, Gatto, Pinkston, and Chandler have engaged in and are likely to engage in acts or practices that violate Section 5(a) of the FTC Act.”

According to the filing, if Judge Moore grants the motion, the defendants will have two weeks from Snow’s report to object. If they do not, they will be unable to appeal the ruling “except upon grounds of plain error if necessary in the interest of justice.”

Because the temporary restraining order would expire before this two-week period ends, it has been extended until April 9 by Judge Moore, court filings show.

The original TRO was granted near the end of February, but its enforcement was not revealed until mid-March.

The full report and recommendation can be found below:

Dluca Et Al Report and Recommendation by CoinDesk on Scribd

Court image via Felix Lipov / Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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