June 2022

New Analysis Finds Consumers Reported Losing More than $1 Billion in Cryptocurrency to Scams since 2021

Consumers reported losing over $1 billion to fraud involving cryptocurrencies from January 2021 through March 2022, according to a new analysis from the Federal Trade Commission. Fraud reports suggest cryptocurrency is quickly becoming the payment of choice for many scammers, with about one out of every four dollars reported lost to fraud paid in cryptocurrency.

The FTC’s latest Consumer Protection Data Spotlight finds that most of the cryptocurrency losses consumers reported involved bogus cryptocurrency investment opportunities, which totaled $575 million in reported losses since January 2021. These scams often falsely promise potential investors that they can earn huge returns by investing in their cryptocurrency schemes, but people report losing all the money they “invest.”

After cryptocurrency investment schemes, the next largest losses reported by consumers were on:

  • Romance Scams: These often involve a love interest who tries to entice someone into investing in what turns out to be a cryptocurrency scam.
  • Business and Government Impersonation Scams: Reports show these scammers often target consumers by claiming their money is at risk because of fraud or a government investigation and the only way to protect their cash is by converting it to cryptocurrency.

Reports suggest that cryptocurrency-related scams often begin on social media. Nearly half of consumers who reported a cryptocurrency related scam since 2021 said it started with an ad, post or message on a social media platform.

People ages 20 to 49 were more than three times as likely as older age groups to have reported losing money to a cryptocurrency scam. Older age groups, however, reported losing more money when they did report a cryptocurrency-related scam.

Some of the red flags consumers should watch out for include:

  • anyone who claims they can guarantee profits or big returns by investing in cryptocurrency;
  • people who require you to buy or pay in cryptocurrency; and
  • a love interest who wants to show you how to invest in cryptocurrency or to send them cryptocurrency.

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FTC Action Results in Ban for Richmond Capital and Owner From Merchant Cash Advance and Debt Collection Industries and Return of More Than $2.7M to Consumers

The Federal Trade Commission’s lawsuit against RCG Advances, LLC and Robert Giardina has led to a court order that permanently bans the company and owner from the merchant cash advance industry for deceiving and threatening small businesses and their owners. The FTC alleged that the scheme’s operators lied to small business owners about terms and fees for their financing, and threatened them with violence when they were unable to pay. In addition, the court ordered RCG Advances and Giardina to make an upfront payment of $1.5 million and subsequent payment of more than $1.2 million to refund consumers.

“These defendants lied to small businesses about financing, stole money from their accounts, made violent threats, and gave false documents to the courts,” said Samuel Levine, the Director of the FTC’s Bureau of Consumer Protection.  “This order bans them from the merchant cash advance business and requires them to return money to the businesses they cheated.”  

RCG Advances and Giardina, along with the other defendants in the FTC’s case, operated a merchant cash advance scheme since at least 2015, the agency alleged. Merchant cash advances are a type of alternative small business financing. Generally speaking, merchant cash advance companies provide funds to businesses in exchange for a percentage of the businesses’ revenue, which typically are paid through daily withdrawals from the business’s bank account. 

The FTC’s investigation found that the defendants in the case, including RCG Advances and Giardina, lied to small businesses about numerous elements of the financing agreements before they were signed, and broke the law in their communications with businesses and their owners after the fact. The harms to small businesses and their owners were extensive, including:

  • Deceiving consumers about personal guarantees: The defendants’ websites falsely claimed that their cash advances required “no personal guaranty of collateral from business owners,” meaning that the people obtaining financing on behalf of companies would not have their personal possessions treated as collateral. In fact, their contracts did include those requirements.
  • Forcing consumers and businesses into confessions of judgment: The defendants also required businesses and their owners to sign confessions of judgment, which allow the defendants to immediately obtain an uncontested judgment in case of an alleged default. The complaint alleges that the defendants illegally and unfairly used these confessions of judgment to unexpectedly and improperly seize consumers’ personal and business assets.
  • Providing less funding than promised: The complaint alleges that when businesses received their funding from the defendants, it was often thousands of dollars less than promised. The shortfall was due to large supposed fees that were not disclosed to the business owners. This happened despite the defendants marketing promises of “no upfront fees.”
  • Threatening consumers and businesses: The complaint alleges that the defendants made threatening calls to consumers, including telling one man that they would “break his jaw” if he did not make his payments and, in another case, threatening to ruin a consumer’s reputation by falsely accusing him of being a child molester if he did not pay.

Enforcement Action

Under a court order agreed to by the defendants in order to settle the case, they will be:

  • Permanently banned from the business financing and debt collection industries.
  • Required to vacate judgments and liens: The defendants are being ordered to vacate any judgments against their former customers and to release any liens against their customers’ property.
  • Prohibited from misleading consumers: The defendants will be prohibited from misleading consumers about any key facts about any good or service, including any fees, the total cost of the product, and other facts that reflect their deceptions in this case.
  • Pay more than $2.7 million: The defendants are being ordered to pay more than $2.7 million, which will be used to provide refunds to consumers harmed by their actions.

The FTC previously obtained a court order in settlement with defendants RAM Capital Funding, LLC and Tzvi Reich. The FTC’s case against remaining defendant Jonathan Braun is still under way.

The Commission vote approving the stipulated final order was 4-0-1, with Commissioner Alvaro M. Bedoya not participating. The FTC filed the proposed order in the U.S. District Court for the Southern District of New York.

NOTE: Stipulated final orders or injunctions have the force of law when approved and signed by the District Court judge.

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Federal Trade Commission Sues Gravity Defyer and its Owner for Violating FTC Order and Making Baseless Pain-Relief Claims to Market Footwear

The Federal Trade Commission is taking action against California-based Gravity Defyer Medical Technology Corporation and its owner Alexander Elnekaveh, filing a complaint in federal district court to permanently stop their allegedly deceptive pain-relief claims for Gravity Defyer footwear.

In a complaint filed in federal district court, the FTC alleged that Elnekaveh violated a 2001 order barring him from such allegedly deceptive advertising by making scientifically unsupported claims and using misleading consumer testimonials to sell Gravity Defyer products. The FTC claimed that the company’s advertisements often targeted older Americans suffering from pain-related conditions like arthritis.

“Ignoring a prior Commission order, Gravity Defyer and its owner used false pain-relief claims to target older Americans and undercut honest competitors,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Healthbased claims require science-based proof, and faking it by misusing studies and customer reviews breaks the law.”

Since at least 2016, the defendants have advertised their Gravity Defyer footwear as containing soles with “VersoShock” technology that supposedly relieves pain, including pain in people suffering from numerous medical conditions. According to the FTC’s complaint, the ads claim, without competent and reliable scientific evidence, that Gravity Defyer footwear:

  • will relieve pain, including knee, back and foot pain;
  • will relieve pain in people suffering from multiple conditions such as plantar fasciitis, arthritis, joint pain, and heel spurs; and
  • is clinically proven to relieve pain, including 85 percent less knee pain, 91 percent less back pain, 92 percent less ankle pain, and 75 percent less foot pain.

Gravity Defyer has sold more than 100 styles of footwear for men and women on its website, including athletic shoes, casual shoes, dress shoes, hiking shoes and boots, and sandals. Prices have ranged from $140 for men’s and women’s sandals to $155 for the widely advertised Mighty Walk walking shoes, and $235 for men’s work boots.

The company sells Gravity Defyer footwear on its own website, through its in-house call center, and at retailers throughout the country, including The Walking Company, Hammacher Schlemmer, and Shoe City, according to the FTC. It advertises the products through magazine ads, Facebook ads, Internet ads, radio commercials and catalogs.

One of the company’s ads stated that Gravity Defyer shoes are “clinically proven pain defying footwear.” Another said, “Enjoy the benefits of exercise, with proven pain relief.” The company’s ads cite a study to back up their claims, but the FTC alleges this study has substantial flaws and was insufficient to determine the effects of wearing Gravity Defyer footwear.

In filing the complaint, the Commission is seeking an order permanently barring the defendants from making misleading or deceptive pain-relief claims, as well as civil penalties and other relief.

The Commission vote to authorize the staff to approve the complaint and proposed order was 4-0. It was filed in the U.S. District Court for the District of Columbia.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest.

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Federal Trade Commission Returns More Than $164,000 To Consumers Harmed by Bogus Mortgage Relief Scam

The Federal Trade Commission is sending 2,155 checks totaling more than $164,000 to consumers who were harmed by a bogus mortgage relief scam that operated under the names Brookstone Law and Advantis Law.

Consumers who receive checks should cash them within 90 days, as indicated on the check. Recipients who have questions about their refund, or who didn’t receive a check and believe they may be eligible for a refund, should call the refund administrator, JND Legal Administration, at 855-606-0653. The Commission never requires people to pay money or provide account information to get a refund.

The FTC sued Brookstone and the attorneys who operated it in 2016 for falsely telling homeowners that they could join so-called “mass joinder” lawsuits against their lenders that would save them from foreclosure and provide additional financial awards. The court ruled in 2017 that the defendants “made numerous false and/or misleading material statements to consumers,” including falsely claiming that homeowners could get “at least $75,000” or their homes “free and clear” through these so-called mass joinder lawsuits. The defendants charged consumers $895 or more for a “legal analysis” and thousands of dollars in recurring legal fees. Although the defendants filed some lawsuits, they failed to file all promised lawsuits and never won any of the lawsuits.

The U.S. Supreme Court ruled in 2021 that the Commission lacks authority under Section 13(b) to seek monetary relief in federal court going forward. The money being returned to consumers today comes from settlements that were entered before the Supreme Court’s decision. The Commission has urged Congress to restore the Commission’s ability to get money back for consumers.

The Commission’s interactive dashboards for refund data provide a state-by-state breakdown of Commission refunds. In 2020, Commission actions led to more than $483 million in refunds to consumers across the country.

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