The U.S. Commodity Futures Trading Commission (CFTC) has filed its first-ever pig-butchering enforcement action against an alleged California ‘crypto’ scammer.
Filed in the Central District of California, the civil action accuses Cunwen Zhu of defrauding over $1.3 million from investors in a digital asset investment scam. Through his company Justby International Auctions, Zhu falsely claimed to channel funds toward BTC and forex trading.
Zhu led a team that engaged in romance scams, better known as pig-butchering scams, according to the regulator. In this scheme, the fraudster establishes an online connection with the target and cultivates it for some time—similar to fattening a pig before its butchering. Once hooked, they direct these targets to deposit money in some scheme.
As with most scams, Zhu and his cronies allowed the victims to withdraw a portion of the purported profits initially. This gave them credibility, with most of the investors re-investing more money.
Between April 2021 and March 2022, Zhu raised over $1.34 million from investors in California and beyond. The CFTC alleges that he fabricated a legitimate online trading platform which he showcased to the investors. This platform allowed investors to track their trades, check their balances, and interface with ‘customer service representatives.’
When customers tried to make large withdrawals or shut down their accounts, they discovered it was all a scam, authorities said. Some would be directed to depositing more funds to ‘unlock’ their profits, while others were just kept on the hook for weeks.
“As people sought to escape the isolation of the pandemic and form a connection to others online, fraudsters saw a new venue to prey on and to take advantage of the public,” CFTC Director of Enforcement Ian McGinley commented.
“Today’s action, which is the first of its type for the CFTC, shows that the CFTC will hold unscrupulous individuals who defrauded customers accountable and protect the public from internet fraud,” the director added.
The agency seeks restitution to the defrauded customers, civil monetary penalties against Zhu and his associates, disgorgement of ill gains, and trading bans against Zhu.
The U.S. Department of Justice has filed a parallel criminal action against Zhu for one count of wire fraud in Florida.
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