The allure of guaranteed profits from sophisticated crypto asset and foreign exchange trading served as the underlying predicate for the claims asserted by the Securities and Exchange Commission (“SEC”) against Ramil Palafox (“Defendant”), the founder of Praetorian Group International Corporation (“PGI Global”), a now-defunct entity he controlled, in S.E.C. v. Palafox, Case 1:25-cv-00681 (E.D. Va. 2025). The case marks the first crypto enforcement action under Paul Atkins, the new Chairman of the SEC.
According to the SEC, from in or about January 2020 through in or about October 2021 (the “Relevant Period”), Defendant orchestrated an international securities fraud scheme to misappropriate millions of dollars of investor funds he obtained through PGI Global.
PGI Global claimed to be a crypto asset and foreign exchange (“Forex”) trading company. The SEC alleged that Defendant and PGI Global associates working at his direction represented to investors that PGI Global was generating large returns from crypto asset trading and Forex trading. According to the SEC, investors who purchased PGI Global “membership packages” were promised large passive returns from these purported trading operations. Though investors were promised such returns merely in exchange for their investments in PGI Global, said the SEC, PGI Global also allegedly offered members a multi-level marketing style system of referral incentives to encourage PGI Global membership package holders to recruit new investors.[1]
Defendant allegedly secured over $198 million in Bitcoin (BTC) and fiat currency investments for PGI Global during the Relevant Period. The SEC maintained that Defendant obtained these funds from victims who purchased PGI Global membership packages based on false promises that their investments would guarantee them large low-risk returns from Forex and crypto asset trading.
According to the SEC, Defendant misappropriated over $57 million of the funds he obtained through PGI Global’s unregistered securities offerings. Rather than trade with these funds as promised, the SEC alleged that Defendant used investor money to enrich himself and various insiders, including members of his family and certain other PGI Global associates—purchasing, among other things, real estate, Lamborghinis, and items from retailers including Cartier, Versace, and Louis Vuitton. The SEC also alleged that Defendant transferred funds, assets, vehicles, and other items purchased with PGI Global investor funds to the relief defendants.
The SEC claimed that Defendant used the vast majority of the remaining PGI Global investor funds to pay certain other investors—payments that ostensibly represented profits and other rewards those investors had earned from PGI Global’s trading operations. The SEC alleged that this money represented funds circulated from new investors to old investors. The SEC further alleged that these payments allowed Defendant to continue PGI Global’s Ponzi-like scheme until its collapse in late 2021.
According to the SEC, PGI Global never filed a registration statement in connection with its offerings of securities in the form of PGI Global membership packages. Defendant and others nevertheless offered and sold these PGI Global securities via general solicitations to investors worldwide, alleged the SEC.
Commenting on the action, Scott Thompson, Associate Director of the SEC’s Philadelphia Regional Office, said: “As alleged in our complaint, [Defendant] attracted investors with the allure of guaranteed profits from sophisticated crypto asset and foreign exchange trading, but instead of trading, [Defendant] bought himself and his family cars, watches, and homes using millions of dollars of investor funds. We will continue to investigate and take action against bad actors who take advantage of investors with promises of guaranteed passive income and other lies and deceit.”
“[Defendant] used the guise of innovation to lure investors into lining his pockets with millions of dollars while leaving many victims empty-handed,” said Laura D’Allaird, Chief of the Commission’s new Cyber and Emerging Technologies Unit. “In reality, his false claims of crypto industry expertise and a supposed AI-powered auto-trading platform were just masking an international securities fraud.”
The SEC’s complaint (here),[2] filed in the U.S. District Court for the Eastern District of Virginia, charges Defendant with violating the anti-fraud and registration provisions of the federal securities laws. The complaint seeks permanent injunctive relief, conduct-based injunctions preventing Defendant from participating in multi-level-marketing programs involving the offer or sale of securities and offerings of crypto assets bought or sold as a security, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties. The complaint also names several persons and entities as relief defendants and seeks disgorgement of their ill-gotten gains and prejudgment interest.
In a parallel action, Defendant was arraigned on criminal charges brought by the U.S. Attorney’s Office for the Eastern District of Virginia.
[1] A multi-level marketing program is a relative of a pyramid scheme. “[A] pyramid scheme is an illegal investment scam based on a hierarchical setup.” See Investopedia.com, What Is a Pyramid Scheme? How Does It Work? (Updated June 3, 2024) (here). In the classic pyramid scheme, “participants attempt to make money solely by recruiting new participants, usually where: [t]he promoter promises a high return in a short period of time; [n]o genuine product or service is actually sold; and [t]he primary emphasis is on recruiting new participants.” See Investor.gov, Pyramid Schemes (here). To lure recruits into the scheme, pyramid scheme promoters work hard to make the operation look legitimate. But they are not and ultimately collapse because the promoter cannot raise enough money from new investors to pay earlier ones. This Blog has examined multi-level marketing schemes on numerous occasions. To find articles related to multi-level marketing schemes, visit the “Blog” tile on our website and enter “Multi-Level” or “Multi-Level Marketing Schemes” in the “search” box.
[2] It is important to remember that a complaint merely contains allegations. Until the claims in the complaint are fully adjudicated, readers should not interpret the allegations as anything more than statements of claimed facts made by the SEC against the defendant.
