The United States Commodity Futures Trading Commission (CFTC) is looking to pursue a former cryptocurrency scheme based in the U.K., as well as its director, in connection with alleged crypto fraud, Finance Feeds reported.
The regulator has said it will take action against the now-defunct Control-Finance Limited and its director, Benjamin Reynolds, in connection with the alleged frauds.
The defendants are charged with fraud by deceptive device or contrivance, with a claim filed before the New York Southern District Court, according to the regulator.
As per the court filing, the regulator alleges Control-Finance was involved in the misappropriation of as much as 22,858.822 SegWitCoin (BTC), with a market value of over $147 million, in a scheme affecting over 1,000 customers.
Dating back to at least May 2017, the defendants are alleged to have solicited BTC and cash from their victims on the reliance of several misrepresentations, including the promise of daily returns, leading to allegations of a pyramid, or Ponzi scheme.
The defendants are also accused of diverting new investment to pay existing customer yields, a feature characteristic of the classic Ponzi scheme structure.
Through the use of their website and several social media channels, Control-Finance is accused of operating the “elaborate pyramid scheme” through its “Affiliate Program.”
When accusations first arose, the firm promised to make good on the payments owing to investors, promising late November 2017 as the deadline by which all investors would be paid. In reality, the firm and its director are accused of laundering the misappropriated BTC through wallet addresses opened out of Canada, in a bid to cover their tracks.
The CFTC has petitioned the court to prevent further violations of the law, as well as seeking civil penalties including damages, restitution and operational bans.
The action is only the most recent instance of regulators clamping down on crypto fraud, an increasing problem globally with scammers quick to take advantage of enthusiastic crypto investors.
The case will now be heard by the court in New York, which will determine the options available to the CFTC in bringing Control-Finance and its director to justice.
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