InfoBytes Blog
CFTC Files Anti-Fraud Enforcement Action Against New York-Based Corporation Concerning Bitcoin Investments
On September 21, the U.S. Commodity Futures Trading Commission (CFTC) filed a complaint in the U.S. District Court for the Southern District of New York against a New York-based corporation and its CEO (defendants) for allegedly engaging in fraudulent acts and practices in violation of the Commodity Exchange Act and CFTC Regulations by issuing false account statements in connection with Bitcoin investment solicitations. According to the complaint, the “Bitcoin Ponzi scheme” solicited more than $600,000 from approximately 80 customers to be placed in a pooled fund, executed by the defendants’ computer program called “Jigsaw,” which traded the virtual currency. The CFTC alleges that defendants’ strategy was fake and the “purported performance reports” were false in that they created the appearance of positive Bitcoin trading increases, but the gains were “illusory.” The CFTC further asserts that the “payouts of supposed profits to [pool participants] in actuality consisted of other customers’ misappropriated funds.” In addition, the CFTC alleges that defendants orchestrated a “fake computer ‘hack’” to conceal the scheme. The suit seeks, among other things, disgorgement of profits, civil monetary penalties, restitution, and a ban on commodities trading for the defendants.