Crypto fraud scheme lands US trader in jail, plus $1.1M in fines

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Regulators around the world have been keeping busy in recent months with the sheer volume of enforcement actions against rogue initial coin offerings (ICOs) and crypto scammers. In the United States, the Commodity Futures Trading Commission (CFTC) has weighed in with its latest penalty, following multi-agency efforts to bring a fraudulent crypto trader to justice.

The action involves Joseph Kim, of Phoenix, Arizona, who is alleged to have “misappropriated” BTC and LTC from his employer in Chicago. On detection, Kim was fired, with his employer discovering a $600,000 black hole in their accounts.

In order to repay, Kim was then found to have solicited BTC by fraudulent means from unsuspecting investors, who he assured would benefit from low-risk investments. According to a CFTC statement, Kim had hoped to trade his investors’ capital for a profit, which would then be used to repay his original debt.

However, after losing the investment through a series of ill-judged directional bets on BTC markets, Kim found himself with a further $545,000 to account. In order to cover his tracks, the CFTC said Kim continued to send statements of account to his investors fraudulently reflecting profitable trading.

After working in partnership with the FBI and other law enforcement agencies, CFTC has ordered Kim to repay the total of around $1.1 million in restitution. Separately, in an action led by the U.S. Attorney for the Northern District of Illinois, Kim has been found guilty of wire fraud and fraudulent solicitation, sentenced to 15 months.

CFTC Director of Enforcement James McDonald welcomed the action against Kim, as the latest in a series of similar measures being taken against crypto scammers, saying that “the criminal indictment and sentence reaffirms the CFTC’s commitment to working in parallel with our partners at the Department of Justice to root out misconduct in these markets.”