CFTC seeks default judgment against Control-Finance fraud scheme

The U.S. Commodity Futures Trading Commission (CFTC) is pushing for default judgment against fraudulent digital currency scheme Control-Finance and its director Benjamin Reynolds, in the latest high profile enforcement action brought by the regulator.

In a letter submitted to a court in New York this week, the CFTC said it plans to move for a default judgment after securing a Certificate of Default against Reynolds, and a Notice of Voluntary Dismissal filed back in April.

The Certificate of Default was issued after Reynolds failed to plead, or respond to defend the action. Similarly, the Notice of Voluntary Dismissal dismissed Control-Finance from the case at an earlier date.

The court will now consider whether to grant the default judgement against Reynolds, which would enable the CFTC to proceed with enforcement. Subject to approval from the courts, the regulator has said it intends to file the motion within 45 days of the letter—before August 20.

According to the details of the original complaint, the CFTC alleges Reynolds and Control-Finance had been operating a fraudulent digital currency scheme dating back to 2017.

Designed to exploit public interest in BTC at the time, the scam is thought to have misappropriated as much as $147 million across over 1000 individual investors.

According to the regulator, Control-Finance had been using new money to pay returns to existing investors, fitting the classic mode of pyramid, or Ponzi schemes. The returns were falsely said to be from BTC trading, to solicit more investment from unsuspecting victims.

In early September 2017, the Control-Finance website suddenly disappeared, as operations were abruptly shut down. When met with protests from investors, Reynolds and Control-Finance maintained the firm would make good on money owed to those affected by the scheme.

Through the action, the CFTC is pushing for monetary penalties and ancillary relief, which reportedly include registration bans, disgorgement and restitution.  

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