BTC trading scam suspects ordered to pay $1.75M in CFTC lawsuit

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Three men who allegedly duped investors in a BTC trading scam have been ordered by a federal court to pay $1.75 million in restitution and penalties. The three were charged for the scam by the Commodity Futures Trading Commission (CFTC) in September 2020 for duping at least 27 investors for close to $1 million.

In a press release, the CFTC revealed that the Southern District of Texas had entered the consent order against the three alleged BTC scammers. Mayco Alexis Garcia is to pay a civil monetary penalty worth $400,000, while Cesar Castaneda and Joel Garcia are each set to pay $180,000. Collectively, the three are also set to pay $989,550 in restitution.

The CFTC filed the charges against the three—and a fourth defendant Rodrigo Molina—in September 2020. Litigation against Molina is still ongoing.

According to the charges, the four were the founders and operators of Global Trading Club. From August 2016 to October 2017, they lured clients to invest in their firm, claiming that it employed “master traders” with years of experience trading digital currencies. They also claimed that the company operated “cutting edge trading robots” to trade BTC for clients 24/7.

To further lure clients, they lied to them that the more money they invested, the higher their earnings would be. Those who brought in new clients would earn extra bonuses, a classic tell-tale sign of a Ponzi scheme.

“Additionally, to conceal their fraud, the defendants caused misleading trading statements to be posted online,” the CFTC added.

In that period, 27 individuals deposited at least $989,000 with one or more representatives of the firm.

Aside from the restitution and the civil monetary penalties, the consent order imposes a permanent injunction and permanently bans the three from registering with the CFTC and from trading commodity interests.

This is the latest in a long list of digital currency-related companies that have settled with U.S. regulators for millions of dollars. The latest is derivatives exchange BitMEX which settled for $100 million with the CFTC and FinCEN. Poloniex exchange also recently settled for $10 million for operating in the U.S. illegally.

The digital currency industry has become a cash cow for U.S. regulators, aided by the lack of definitive regulations, and more importantly, a misguided belief by a huge portion of the industry that it’s beyond the scope of regulators. Since 2009, U.S. regulators have levied a shocking $2.5 billion from the industry in penalties as per data by Elliptic, the London-based blockchain intelligence firm.

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