Table of Contents
Introduction
Throughout 2017 and 2018, Digital Profit functioned as a platform for trading cryptocurrencies. In 2018, the Securities and Exchange Commission (SEC) found evidence of fraudulent activity and ordered the company to be shut down. The Securities and Exchange Commission (SEC) asserted that Digital Profit was complicit in a multi-tiered, mega-scale securities fraud scheme that included the manipulation of the price of cryptocurrencies, the theft of investor funds, and the provision of investors with statements that were both false and misleading. In this post, we will talk about the claims that have been made against Digital Profit, the influence that the case has had on investors, and the lessons that have been learned from it.
Context Regarding the Earnings from Digital Assets
Throughout 2017 and 2018, Digital Profit functioned as a platform for trading cryptocurrencies. Gery Shalon, Ziv Orenstein, and Joshua Samuel Aaron, all of whom had been engaged in numerous fraudulent actions in the past, including the data breach at JPMorgan Bank in 2014, were the ones who first established it.
It was claimed by Digital Profit that it could give investors a fully automated trading platform for cryptocurrencies, one that made use of algorithms and machine learning to forecast market moves and create profits. The platform was promoted as a safe and dependable investment option that provided large returns with a relatively low level of risk.
Fraud in the Stock Market Accusations Leveled Against Digital Profit
In 2018, the SEC initiated an investigation into allegations of securities fraud involving Digital Profit and its creators. The Securities and Exchange Commission (SEC) asserted that Digital Profit was complicit in a multi-tiered, mega-scale securities fraud scheme that included the manipulation of the price of cryptocurrencies, the theft of investor funds, and the provision of investors with statements that were both false and misleading.
The first stage of the scheme consisted of Digital Profit engaging in price-fixing activity with cryptocurrency markets. The Securities and Exchange Commission (SEC) made allegations that Digital Profit engaged in a number of fraudulent practices, including spoofing and wash trading, in order to provide the appearance of high trading activity and artificially raise the price of cryptocurrencies. Because of this deception, Digital Profit was able to create big profits, while its investors were forced to take considerable losses.
The second stage of the scam comprised the fraudulent use of monies contributed by investors. According to allegations made by the SEC, Digital Profit utilized investor cash for activities outside of trading, such as paying for personal expenditures and supporting other business endeavors. The SEC said that the founders of Digital Profit misappropriated more than $15 million dollars worth of investor monies in this manner.
The third stage of the scam consisted of deceiving investors by providing them with inaccurate and misleading information. The Securities and Exchange Commission (SEC) said that Digital Profit made false and deceptive representations about its trading algorithms, its financial performance, and its regulatory compliance. But, in fact, the platform was poorly constructed, and its performance did not live up to the claims that were made about it. Digital Profit made the claim that they had a team of experienced traders and developers working on the platform.
The employment of front firms, or “shell companies,” to disguise Digital Profit’s participation in illicit operations was the fourth stage of the scam. According to allegations made by the SEC, Digital Profit allegedly used a web of front businesses in order to launder money and conceal who really owned the assets. Because of the usage of shell corporations, it was difficult for investors to keep track of their assets and retrieve their lost money.
Influence on Capital Contributors
The investors were significantly impacted as a result of the charges of securities fraud leveled against Digital Profit. All of the money that investors had put into Digital Profit was destroyed, and many of these investors had substantial financial setbacks as a result. The examination into Digital Profit that was conducted by the SEC uncovered the fact that the platform in question was nothing more than a fraudulent operation that was meant to scam investors.
While making investments in bitcoin trading platforms, investors should always use extreme caution. Since there is a lack of regulation in the cryptocurrency market, it is very simple for fraudulent schemes to be put into action. Cryptocurrencies are a relatively new asset class. Before putting their money into an investment platform, potential investors should do their homework on its operations, financial performance, and regulatory compliance.
What We Can Take Away from This Experience?
The story of Digital Profit demonstrates the need of doing thorough research before investing. Before putting their money into any scam, investors should do exhaustive research and due diligence on the opportunity. Researching the platform’s financial statements, regulatory filings, and any articles or reports that have been published about the platform should be part of your due diligence. Also, investors should investigate the platform’s management team to learn about their prior work expertise in the sector.
Investors should be careful of platforms that do not operate in an open and transparent manner about their business practices or that make representations that are either inaccurate or deceptive regarding the investment possibilities they provide. Investors should likewise use extreme caution when dealing with platforms.
You may also like: Mohammed bin Salman expands Saudi investments in video game companies
