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Financial Services Law Insights and Observations

CFTC charges South African fund with CEA violations

Securities CFTC Enforcement Commodity Exchange Act


On June 30, the CFTC filed charges against a South African investment fund and its CEO for an allegedly fraudulent scheme that raised over $1.7 billion worth of Bitcoin from the public in violation of the Commodity Exchange Act (CEA) and CFTC Regulations. The complaint alleged that the CEO used various websites and social media to fraudulently solicit bitcoin from public participants to participate in a commodity pool controlled by the company, and “purportedly traded off-exchange, retail foreign currency (‘forex’) on a leveraged, margined and/or financed basis with participants who were not eligible contract participants (‘ECPs’) through a proprietary ‘bot’ or software program.” The CFTC is seeking: (i) full restitution for defrauded investors; (ii) disgorgement; (iii) civil monetary penalties; (iv) permanent registration and trading bans; and (v) a permanent injunction from future violations.