Bitcoin [BTC] – US CFTC Regulator Sues Defunct British Bitcoin Trading Pyramid Scheme over $147M Fraud Funds

CFTC

The United States Commodity Futures Trading Commission (CFTC) is seeking legal redress on behalf of cryptocurrency investors who fell for an alleged Bitcoin Ponzi scheme that was in operation between May 1, 2017, and Oct. 31, 2017, by the UK-based now-defunct Control-Finance Limited.

In the Monday filing by the CFTC, the regulator is accusing the company of defrauding more than 1,000 investors off 22,858.822 BTC worth approximately $147 million at the time. The lawsuit has been brought against both the Control-Finance company as well as its CEO Benjamin Reynolds.

The court filing describes the two defendants as having taking advantage of “public enthusiasm for Bitcoin” and fraudulently obtaining and misappropriating their funds with the promise of using their funds to trade on the cryptocurrency markets and earning them a guaranteed 1.5% per day (or 45% per month). The company allegedly used false marketing material to portray to its victims that it employed expert professional traders who would earn the investors a guaranteed daily return on their investments.

In addition, the CFTC claims that Control-Finance ran a recruiting program for its investors it called an “Affiliate Program” for introducing new investors on to the platform. “The defendants marketed and concealed their fraud through an elaborate pyramid scheme they called the Control-Finance “Affiliate Program,” the court filing reads adding that “Through the Affiliate Program, the defendants fraudulently promised to pay, in the form of Bitcoin, escalating referral profits, rewards, and bonuses to “Affiliates,” or persons who referred new customers to Defendants.”

If at any point, any of the investors chose to withdraw their ‘earnings’, Reynolds would divert funds from other investors’ accounts in order to make the payments. “In reality, the defendants made no trades on customers’ behalf, earned no trading profits for them, and misappropriated their Bitcoin deposits,” stated the CFTC.

In the CFTC documents, the regulator claims that the company suddenly took down its website on September 10th, 2017 together with its social media pages for Facebook, Twitter, and YouTube. The company claimed to be processing reimbursement to its investors through late October or early November 2017, a promise that was not fulfilled. The Control-Finance company was dissolved by a British regulator in February 2018.

Now the CFTC is seeking civil monetary penalties, restitution, and rescission, disgorgement of ill-gotten gains, trading and registration bans, and permanent injunctions against further violations of the federal commodity laws, as charged. The regulator filed the case on Monday at the U.S. District Court for the Southern District of New York.