The number of illegitimate digital currency offerings may have dwindled, but there are still those individuals who try to get something for nothing. Florida resident Alan Friedland and two companies he launched, Fintech Investment Group and Compcoin LLC, were perpetuating a scam through the Compcoin digital currency, never intending to produce a viable product. The U.S. Commodity Futures Trading Commission (CFTC) has now gone after Friedland and the companies, but not before the fraudster was able to attract around $1.6 million in investments.
The CFTC filed a complaint against Friedland and his entities for “fraudulently soliciting” investments from individuals in relation to a “leveraged or margined off-exchange foreign currency (forex) scheme” from 2016 through 2018. The scammer had lied to investors, telling them that he had created a winning trading algorithm, dubbed ART, that would guarantee high rates of return. That algorithm was said to have been created after eight years of solid testing but, after turning over their money, investors were never given access to the system.
The complaint follows a move by the National Futures Association (NFA), which had banned Friedland at the end of March after he failed to comply with orders by the organization to provide details surrounding his activity. The CFTC explains in its complaint, “Prior to the purchase of Compcoin by anyone, defendants knew that Compcoin could not be used by customers to gain access to ART because Fintech had not been approved to advise customers as to trading forex using ART.” It adds, “The NFA advised defendant Fintech in writing that the forex trading disclosure documents, which Fintech had submitted to the NFA for approval, were deficient and could not be used to solicit customers for forex trading using ART until acceptable disclosures were filed with, approved and accepted by the NFA.”
This isn’t the first time Friedland has come under fire for his scheme, but he apparently didn’t learn his lesson the first time around. In December 2018, he faced a lawsuit in New York after raising $45 million a year prior through an unregistered initial coin offering. That suit, however, was ultimately dismissed after the case against him fell short in terms of evidence.
James McDonald, the CFTC Director of Enforcement, adds in the latest complaint, “The CFTC remains committed to protecting market participants from fraudulent schemes, including novel forms of fraud like the one alleged here, where defendants allegedly solicited customers to purchase a digital asset in order to gain access to Fintech’s purported forex trading algorithm.” The regulator is seeking civil monetary penalties, restitution, bans on trading and registration and a permanent injunction against Friedland and his companies.
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