A federal court in New York halted the Securities and Exchange Commission's civil fraud case against alleged cryptocurrency pyramid scheme AirBit Club on October 5th, following requests from defendants Cecilia Millan and Margarita Cabrera. The stay will remain in effect while the Department of Justice pursues its criminal prosecution against several individuals tied to the operation.
AirBit Club, launched in 2015, promised investors daily returns of up to 1.2% through purported cryptocurrency mining and trading. Federal prosecutors and the SEC contend the scheme operated as a classic Ponzi, paying earlier investors with funds from new recruits rather than legitimate profits. The operation allegedly defrauded thousands of victims worldwide out of over $100 million before its collapse.
The SEC filed its civil complaint in August 2020, accusing Millan, Cabrera, and others of operating an unregistered securities offering and defrauding investors. The complaint detailed how promoters aggressively recruited new members, often at lavish events, emphasizing the supposed "passive income" from crypto investments. No actual mining or trading activity supported the promised returns.
The criminal proceedings against AirBit Club principals began in August 2020 with the arrests of several key figures, including Millan. The Department of Justice brought charges of wire fraud conspiracy, money laundering conspiracy, and operating an unlicensed money transmitting business. These charges allege a sophisticated international network designed to funnel investor funds through shell companies and various bank accounts, obscuring the scheme's true nature.
Millan and Cabrera petitioned the court for a stay in the civil case, arguing substantial overlap existed between the two legal actions. They noted that defending parallel civil and criminal proceedings simultaneously would be unduly burdensome and inefficient. Both defendants had already ceased their promotional activities for AirBit Club. Millan stopped around August 18, 2020, coinciding with her arrest in the criminal matter. Cabrera also ended her involvement the same day, after federal agents executed a search warrant at her residence.
Cabrera is not a defendant in the criminal case, but Millan is. Millan specifically cited concerns about self-incrimination if forced to provide discovery or testimony in the civil case while facing criminal charges. The court found her argument compelling, acknowledging the potential for prejudice and the judicial economy of pausing the civil proceedings until the criminal case progresses. This decision allows the criminal investigation and prosecution to take precedence, preventing defendants from being compelled to reveal information that could be used against them in the parallel criminal action.
The stay means the civil case will remain dormant, delaying any potential restitution or asset recovery for victims through SEC channels until the criminal matter resolves or significantly advances. Victims of such schemes often face lengthy waits for any possibility of recouping losses, as assets must first be identified, seized, and then distributed through complex legal processes. The SEC typically seeks disgorgement of ill-gotten gains and civil penalties, which would then be earmarked for victim compensation.
Activity in the criminal case has seen recent developments. After two sealed documents were filed in late September and early October 2020, a more significant update came in June 2021. The government informed defendants it was preparing to release a substantial volume of discovery materials. Consequently, the defense requested a postponement of a scheduled June 3rd status conference. The court granted this request on June 1st, rescheduling the conference for October 13th. The extensive discovery process often signals that prosecutors are building a comprehensive case, requiring significant time for defense attorneys to review the evidence.