In sync with rising crypto-adoption, government bodies have stepped up and implemented stricter regulations, in light of the space’s history and susceptibility to fraudulent activities. The Commodity Futures Trading Commission (CFTC) has been making a lot of effort in this regard and recently, caught a Bitcoin trading and investment company for fraudulent activities.
According to the civil enforcement action (complaint), Control-Finance Limited and its principal, Benjamin Reynolds, are charged of exploiting public enthusiasm for Bitcoin by fraudulently obtaining and misappropriating at least 22,858.822 BTC – worth at least $147 million at the time, from more than 1,000 customers.
The information was brought to light on Twitter by @Guruleaks1, who tweeted,
“CFTC Charges Company and its Principal in $147 Million Fraudulent Bitcoin Trading Scheme.”
The official complaint alleges the defendants fraudulently solicited customers to purchase and transfer Bitcoin to them through various online mediums. The accused have also been charged for illegally diverting customers’ Bitcoin deposits to make Ponzi scheme-like payments to customers who requested account withdrawals.
Providing clarity to the incident, CFTC Director of Enforcement, James McDonald, said,
“The CFTC will continue to vigorously police the Bitcoin markets, including fraudulent trading activity as alleged in the Complaint here. We caution potential virtual currency customers, once again, that they should engage in appropriate diligence before purchasing or trading virtual currencies”
In addition to false investment claims, the people in question also fabricated weekly trade reports, which identified illusory, purportedly profitable virtual currency trades that the defendants never placed. McDonald also emphasized on the fact that fraud in these (crypto) markets not only harms customers, but if left unchecked, could also hinder innovation.
In addition to misrepresenting earnings and associated risks, the complaint accuses the defendants of concealing the aforementioned fraud through an elaborate pyramid scheme. The official CFTC press release said,
“The defendants’ misappropriation scheme relied on creating unique single-use wallet addresses to receive customers’ Bitcoin deposits, which were routed to other pooled wallets.”
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