SEC Files Complaint Against Chen Over GemCoins
The SEC has recently sued Steven Chen, president of the investment company USFIA, for unregistered sale of securities, fraud in the sale of securities, and fraud in connection with the purchase and sale of securities in regards to “GemCoin,” a digital currency scheme that, if proven, will be one of the largest scams of its kind.
GemCoin was an investment scheme launched in 2013, promising to pay investors supposedly intrinsic-value “GemCoins,” a cryptocurrency backed by Alliance Finance Group’s “10 Precious Gem mines.” Steven Chen is considered the ringleader of all of this, being the sole proprietor of the 13 companies. Besides this, AFG allegedly has over $50 billion in assets, with more than 2,000 associates working in branches in 18 different countries.
USFIA claims to own the AMMINE El Valle amber mine in the Dominican Republic, “where the best of Dominican mineral ambers are discovered.” Not only does USFIA and AFG mine, process, market, and distribute Amber, both entities claim also to do the same for other precious metals such as emeralds and diamonds.
In an overview video produced by USFIA, the company claims that GemCoins “are backed by intrinsic value. (They) own the mines. 10 different mines worldwide. They work the mines, they process the gems, they market the gems, and they sell the gems. As we purchase gems, the same amount of gems that we purchase gets stored, which backs the currency.”
Investors who continue to do research on the company and their related partners, could fall under the impression, according to the SEC complaint, that:
- The use of GemCoin as a virtual currency has been legalized by the State of California.
- GemCoin is backed by $15 billion in assets and that there is “zero” chance of devaluation because GemCoins are backed by their equivalent in precious stones.
- That 2000 ATM platforms exist for converting GemCoins into paper money.
False promises like the ones above, as well as those of guaranteed and sharp increases in the value of GemCoin, and 100% accountability lured more than $32 million from investors pockets. The scheme was able to continue for so long due to the incentivizing reward system implemented, with rewards ranging from a 10% “Recommendation Award” all the way to a Mercedes-Benz, depending on how many investors (and how much these investors invested) the referrer brought in.
The warning signs were many: delay of the supposed USFIA IPO, the too good to be true promises, the worthless amber sent to investors, as well as the massive amount of misinformation spread through the numerous websites Chen controlled.
Since the charges have been filed, $4 million of the $7.5 million was blocked but not before Chen was able to wire $3.5 million to China. The rest of Chen’s assets are now frozen by the SEC.
A class action lawsuit from the investors is expected to follow soon as well. BTCManager will keep you updated on any changes regarding the progression of GemCoin in court.