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CFTC charges U.K. company with fraudulent bitcoin scheme

Securities CFTC Virtual Currency Courts Bitcoin

Securities

On June 18, the CFTC announced it filed a complaint in the U.S. District Court for the Southern District of New York against a United Kingdom-based bitcoin trading and investment company and its principal (collectively, “defendants”) for allegedly fraudulently obtaining and misappropriating almost 23,000 bitcoin from more than 1,000 customers. The CFTC alleges the defendants violated the Commodity Exchange Act by fraudulently soliciting customers to purchase bitcoin with cash and then deposit the bitcoin in accounts controlled by the defendants. The CFTC alleges that the defendants misrepresented that they “employed expert virtual currency traders who earned guaranteed daily trading profits on customers’ Bitcoin deposits.” Additionally, the CFTC alleges the defendants also fabricated weekly trade reports and “manufactured an aura of profitability” by depositing new customer bitcoin purchases to other customer accounts. The scheme, according to the CFTC, obtained almost 23,000 bitcoins “from more than 1,000 members of the public,” “which reached valuation of at least $147 million.” The CFTC is seeking civil monetary penalties, restitution, rescission, disgorgement, trading and registration bans, and injunctive relief against further violations of the federal commodity laws.

 

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