Florida Group Faces Fraud Charges for Alleged Altcoin 'Pump and Dump'

Five individuals have been named in a Florida lawsuit that involves an altcoin pump-and-dump and the fraudulent presale of scrypt mining ASICs.

AccessTimeIconDec 17, 2014 at 9:35 p.m. UTC
Updated Sep 11, 2021 at 11:23 a.m. UTC

A group of Florida residents have been accused of fraudulently selling scrypt mining ASICs as part of an altcoin 'pump-and-dump' scheme.

Allegedly perpetrated from March 2013 through August of this year, the scheme centered on a cryptocurrency called cachecoin, whose market is said to have been manipulated by the actions of the defendants.

The five individuals, which include a married couple, as well as a company called Scrypted Life, are also accused of stealing funds raised for an independent mining operation, Fibonacci Scrypt Mining ASICs.

Represented by Florida-based law firm Akerman LLP, the plaintiffs are seeking loss-of-profit damages, as well as reparation for legal costs, and have requested a trial by jury.

Akerman attorney Christopher Hopkins told CoinDesk that those named in the case used a variety of means to collect funds from unsuspecting investors.

By including an alleged pump-and-dump scheme in the plan, he said, the group was able to further boost its fraudulent revenues, explaining:

"They conned investors and buyers to convert their money to cachecoin, claiming a discount for any investment or purchase with Fibonacci in cachecoin. In the end, after taking money from my clients and others, we believe that the Fibonacci defendants also walked off with ‘pump-and-dump profits' from cachecoin."

The defendants have been charged with fraud, unjust enrichment, false advertising, negligence and violation of state investment statutes, according to documents filed 3rd December.

Broken promises

Court documents provided to CoinDesk state that the defendants allegedly used social media platforms such as Litecoin Talk to promote and sell mining units that were never developed or delivered by Fibonacci.

Fibonacci allegedly conducted a broader, multi-layered promotional campaign that resulted in several different money-generating initiatives, including the ASIC presales and the pump-and-dump scheme in the cachecoin market.

The Fibonacci ASIC – a project that followed an previously planned mining unit – was announced in December 2013. The Fibonacci group began accepting pre-orders in March 2014.

Fibonacci purportedly enticed customers to convert bitcoins for cachecoins in exchange for a discount on mining devices that were said to be in development. This led to a rise in volume and the overall price for that altcoin – an event that the documents say was planned by Fibonacci so it could profitably sell its holdings to unsuspecting customers.

Both plaintiffs involved exchanged bitcoins worth thousands of dollars at the time for cachecoins, and sent those coins to the Fibonacci group as payment for the scrypt ASICs. One plaintiff bought about $18,000 dollars in cachecoins, while the other purchased roughly $30,000-worth.

The documents explain:

"Unbeknownst to plaintiffs, this was part of defendants’ scam to not only take plaintiffs’ money directly but to profit by having plaintiffs and other 'buyers' and 'investors' use cachecoin, which increased the value of cachecoin. This was of interest and profit to defendants, who were responsible for launching cachecoin."

Both payments were issued on 17th March. One of the plaintiffs, the court filings state, later received a partial refund worth approximately $3,500 in July.

Fibonacci told customers at the time that both the ASICs would be delivered and the mining operation started in August.

Collapse in August

When the anticipated date arrived, however, the filings argue neither the ASICs nor the planned mining operation had materialized.

According to posts on Litecoin Talk, customers stopped hearing from Fibonacci staff. At the same time, the Fibonacci website, through which payments were being processed, went offline. Compounding the situation was the sudden drop in the price of cachecoins, which according to the plaintiffs has continued to this day.

Plaintiffs argue Fibonacci’s actions resulted in both the loss of profit from mining units that were never delivered, as well as damages through the eventual collapse in the cachecoin market.

The filing states:

"At or around August 2014, Cachecoins were essentially worthless. As of today, Cachecoins are worth less than $0.0003 cents with little interest or activity."

Hopkins said that the defendants named in the case have been served, and that ultimately, cases like this could lead to a more transparent environment for potential investors.

“These suits may just run out of town the scourges who see financial potential in the virtual currency space through ploys and scams rather than diligence and ingenuity,” he said.

A full copy of the court filing can be found below:

Legal image via Shutterstock


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