In a recent ruling, a default judgment was issued by the U.S. District Court for the District of Arizona against a digital asset platform known for fraudulent activities. The judgment, part of an action taken by the Commodity Futures Trading Commission (CFTC), found the platform liable for failing to comply with regulations concerning digital asset trading and for misappropriating more than $2 million from customers.
As part of the judgment, the platform has been barred from participation in any trading within CFTC-regulated markets and prohibited from registering with the agency. Additionally, it is required to pay a monetary penalty totaling more than $2.4 million, which includes both a civil monetary penalty and restitution to affected customers.
The scheme involved a relief defendant who acted as a money mule, facilitating the illegal actions by allowing the platform to use his digital asset wallet to misappropriate funds from at least one customer. He is believed to be a national from China, and subsequent court orders have mandated that the digital assets found in his wallet, estimated at around $120,000, be returned to the fraud victim.
The CFTC emphasized its commitment to protecting U.S. citizens from online scams, highlighting the diligent work of its staff in bringing this case to a conclusion. However, they also warned that victims might not recover their lost funds entirely, as the responsible parties might lack the necessary funds or assets to repay.
The case stemmed from a previous complaint filed by the CFTC in January 2024. The complaint alleged that the platform operated several internet domains designed to lure victims into a sophisticated fraud scheme that falsely promised returns through digital asset commodity trading. The fraud involved a coordinated strategy engaging three distinct groups:
1. Individuals posing as “Solicitors” used social media to build relationships and persuade victims to open and fund trading accounts.
2. A “Customer Service” group which claimed to assist in setting up and managing these trading accounts.
3. “Money Mules,” like the aforementioned individual, who were utilized by the platform to receive and misappropriate customer funds.
Contrary to promises made to customers, their funds were not used for trading. Instead, the platform misappropriated them, creating websites that merely simulated a legitimate trading environment. Customers were led to believe they had active trading accounts, but no real trading activities occurred on their behalf.
The CFTC has reiterated its resolve to combat online fraud and hold accountable those responsible, striving to ensure that victims are recognized and their rights protected. The case serves as a cautionary tale highlighting the importance of vigilance in the realm of digital asset trading, especially in the face of increasingly sophisticated fraud tactics.