CFTC Files Lawsuit Against Control-Finance for $147 Million Fraud

The company was charged for “illegally diverting customers’ Bitcoin deposits to make Ponzi scheme-like payments.”

The Commodity Futures Trading Commission (CFTC) on Tuesday announced that it has filed a civil enforcement action against Control-Finance Limited, a purported Bitcoin trading and investment company, and its founder Benjamin Reynolds.

Per the commodities regulator, the United Kingdom-based company lured the victims to transfer Bitcoins to them “by falsely representing that they employed expert virtual currency traders who earned guaranteed daily trading profits on all Bitcoin deposits.”

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Filed in the US District Court for the Southern District of New York, the complaint charged the defendants for duping 1,000 customers and exploiting public enthusiasm for Bitcoin by fraudulently obtaining and misappropriating at least 22,858.822 Bitcoin, worth around $147 million. The fraudulent operation started on May 1, 2019, and continued till October 31 that year.

“The defendants made numerous material misrepresentations and omissions, including that they (1) earned customers 1.5 % in daily Bitcoin trading profits and up to 45% per month; (2) used risk diversification methods to protect customers’ Bitcoin deposits; and (3) provided a “safe haven” from Bitcoin market risks,” the CFTC press release stated.

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Accumulating Bitcoins and doing nothing

However, according to the regulator, the company made no trades on its customers’ behalf and earned no trading profits. It even published false reports of their trading activities and provided customers with “sham account balances and profit figures” that did not even exist.

The British company also ran “affiliate programs” resembling to pyramid schemes and lured its existing customers to bring more clients.

“In reality, Affiliates’ accounts, like all customer accounts, reflected sham balances that were not backed up by actual Bitcoin,” the regulator stated.

Commenting on the lawsuit, James McDonald, director of enforcement at CFTC, said: “The CFTC will continue to vigorously police the Bitcoin markets, including fraudulent trading activity as alleged in the Complaint here. Fraud in these markets not only harms customers but if left unchecked, it could also hinder innovation. We caution potential virtual currency customers, once again, that they should engage in appropriate diligence before purchasing or trading virtual currencies.”

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