A U.S. District Court on Friday received a lawsuit filed by the U.S Commodity Futures Trading Commission against (CFTC) against two suspects allegedly involved in attempts to steal bitcoins from unsuspecting investors, according to an official press release.
The two defendants, identified as Morgan Hunt and Kim Hecroft, floated illicit enterprises to con the public into investing in leveraged or margined foreign currency contracts, such as forex, binary options, and diamonds. According to the press release, both men were charged for “fraudulent solicitation, impersonation of a CFTC investigator and forging CFTC documents” in their grand ploy to scam investors off their bitcoin.
Morgan Hunt who allegedly hails from Arlington, Texas manages Diamond Trading Investment House while Kim Hecroft who is supposedly from Baltimore, Maryland runs First Options Trading to perpetuate their illegal schemes.
Both defendants kept correspondence with clients using their Facebook and email accounts while promising to invest in trading for the clients’ benefits. At least two investors have fallen victims to their racket since January 2017 with one of them ceding to their plea for bitcoin.
Also contained in the complaints filed before the court for the Northern District of Texas was the impersonation of a CFTC investigator and its General Counsel with the use of the regulator’s official seal and forged documents. These fabricated documents were used to alter CFTC’s memorandum, which gave the victims the impression they were required to pay a “tax obligation” to the CFTC.
Investors were also instructed to remit bitcoins to the regulators if they wanted to withdraw their bitcoins later on. The collection of tax has never been the prerogative of CFTC, but the suspects successfully scammed their victims into making tax payments on cryptocurrency accounts.
The CFTC is now seeking restitution for investors who have been defrauded, disgorgement of illegal profits, civil monetary penalties, the permanent embargo on trading and registration activities, as well as a ban from further violations of CFTC regulations and the Commodity Exchange Act.
While commenting on the trend of unscrupulous activities being perpetrated under the guise of the regulating agency, CFTC director of enforcement James McDonald made known in a statement that “increased public awareness of the CFTC’s involvement in policing the virtual currency market has, unfortunately, provided new opportunities for bad actors.”
While adding to this, he said:
“As alleged in the Complaint, Defendants sought to exploit public trust in the CFTC through forged documents purporting to be official CFTC memoranda requiring the payment of a tax on cryptocurrency accounts. The CFTC does not collect taxes. The CFTC is on guard against fraudsters who try to take advantage of the CFTC’s reputation to cheat customers, and will take swift action against such misconduct.”
Virtual Currency Declared as Commodity
A week ago, the CFTC had a ruling tilt in its favor after a US Federal Court declared the MBC token as a commodity in a case against “My Big Coin Pay.”
The Nevada-based enterprise managed by Randall Crater floated a $6 million fraud, per the court’s memorandum of decision. In the ruling, Rya Zobel who presided over the case in Boston maintained ‘My Big Coin’ was under the classification of a commodity in tandem with the definition of the Commodity Exchange Act which entails broad categories.
“That is sufficient especially at the pleading stage, for the plaintiff to allege that My Big Coin is a ‘commodity’ under the act,” Zobel wrote in her judgment.
Perceived as a welcome fillip for the CFTC in exercising oversight function on other virtual currencies, the controversy surrounding the jurisdiction of cryptocurrency remains an issue yet to be resolved.
Securities Exchange Commission Catches Up with 1pool Ltd
In a similar case on Thursday, the Securities and Exchange Commission (SEC) filed charges against 1pool Ltd and its CEO Patrick Bunner over false solicitation from investors in the U.S. and across the globe to purchase security-based swaps. The Marshall Islands-based company is the legal entity affiliated to 1broker.com. Charges leveled against 1pool, and Patrick Bunner was owing to actions that violate federal securities laws.
The statement released by SEC reads:
“1Broker failed to transact its security-based swap on a registered national exchange, and failed to properly register as a security-based swaps dealer,”