Federal authorities Tuesday raided the offices of a digital currency firm accused of swindling investors out of more than $32 million.
Authorities seized computers and boxes of evidences after filing fraud charges against the firm's operator Steve Chen and 13 companies he controls, according to the Los Angeles Times.
Authorities said Chen operated a pyramid scheme that converted investors' holdings into the virtual currency “Gemcoins,” which he claimed was secured by massive amber holdings, according to a Securities and Exchange Commission (SEC) release.
Michele Wein Layne, director of the SEC's Los Angeles Regional Office said in the release that the company's false claims of riches from the amber mining activity “never materialized.” Furthermore, the authorities claimed that Gemcoins are worthless.
The SEC alleged that the defendants violated the registration and antifraud provisions of the federal securities laws and SEC antifraud rules.
UPDATE: Arcadia Councilman John Wuo who previously spoke highly of Gemcoin and was in promotional videos for the cryptocurrency announced his resignation in a Tuesday city council meeting after an investor filed a lawsuit against him, according to the Los Angeles Times.