Arizona Bitcoin Trader Fined and Sent to Jail for Cryptocurrency Fraud

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According to a press release from the U.S. Commodity Futures Trading Commission (CFTC), Joseph Kim, a cryptocurrency trader from Phoenix, Arizona- has been hit with a 15-month prison sentence as well as a $1.1 million fine after he was found guilty of misappropriating cryptocurrencies from various people.
It was discovered that between September and November of 2017, Kim had defrauded his employer, a Chicago-based proprietary trading firm, making a series of Litecoin and Bitcoin transfers owned by the firm into his accounts.

Bitcoin Jail

Defrauding the Employer

When the firm discovered the illegal transfers and questioned him about the whereabouts of the missing tokens, Kim falsely stated that he was compelled to make the transfers due to impending security issues on the exchange where they were stored.

After a thorough investigation was conducted in November 2017, where the firm discovered it had suffered a loss that totaled up to about $601,000, Kim’s appointment was subsequently terminated.

Now in desperate needs for funds to repay his former employers, Kim, begun to solicit funds from various investors. The CFTC reports that between December 2017 and March 2018, he succeeded in defrauding five of his investors of an additional $545,000 worth of cryptocurrencies after stating falsely that he voluntary exited his former company to start his trading firm.

He also falsely claimed that he would only invest the funds that he received in a low-risk arbitrage strategy, when in fact, he invested in a series of high-risk trades— losing all $545,000 of his investors’ money.

Fines and Punishment

Considering the unique circumstances of this fraud case, Kim has been ordered by the CTFC to make a payment of $1,146,000 as a means of restitution to both his former employers and the investors who he had defrauded. Additionally, the commission has also imposed a permanent ban on him that prevents him from making any trades or solicitations in the future.

The United States Attorney brought an entirely different criminal action for the Northern District of Illinois against Kim, where he pleaded guilty to misappropriating the funds of his investors and defrauding his employers. He was sentenced to jail for 15 months.

Mr. James McDonald, who serves as the Director of Enforcement at the CTFC, says that there will be continued cooperation between the commission and both United States Department of Justice (DoJ) and the Federal Bureau of Investigation to ensure that the occurrence of crypto-related crimes is prevented in the future.
In a statement, McDonald stated:

“The Order that was served today just stands as another in the string of cases that show the continued commitment of the CTFC to actively policing and monitoring the market for virtual currencies and ensuring that the interest of members of the public is protected. In addition, both the sentence and criminal indictment only serve as a reaffirmation of the commitment of the CFTC to working in tandem with our partners at the Department of Justice in order to find out any misconduct that is being orchestrated in these markets. I’ll like to thank U.S Attorney Lausch and the members of his staff, as well as the people at the Federal Bureau of Investigation, for their assistance in this case.”

Earlier in November, Zachary Coburn, the founder of EtherDelta, an Ethereum-based crypto exchange, was charged by the U.S. Securities and Exchange Commission with operating a securities exchange platform without going through the proper registration process. The agency, who had taken enforcement actions in the past, against some of the tokens trading on the platform, argued that the platform offered digital assets that were deemed as securities by the regulator. In a settlement deal, Coburn agreed to make a payment of $400,000 in fines for an operating period of 18 months.

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Based in the UK, Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system. Follow him on Twitter: @adejimi or Contact

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