The U.S. commodities watchdog has charged Mosaic Exchange Limited in connection with an alleged digital asset scam that promised up to 60% profits monthly.
In a civil enforcement action filed in the Southern District of Florida, the Commodity Futures Trading Commission (CFTC) accused Mosaic and founder Sean Michael of fraudulently soliciting and inducing investors in the U.S. and beyond to open accounts and trade BTC and other digital assets.
Michael and Mosaic claimed to hold tens of millions of dollars in assets under management to lure customers. The exchange offered a proprietary trading algorithm that it claimed was 82% accurate, with profit margins ranging from 10% to 60% monthly.
“In actuality, contrary to Defendants’ representations, Mosaic was not a trading platform with tens of millions of dollars of assets under management, Mosaic did not have the track record of trading profitability as represented but instead it lost money trading for customers, and Mosaic did not have partnership or broker agreements with the cryptocurrency exchanges that Defendants advertised they had,” the CFTC said.
Through the lies and misrepresentations, Mosaic lured customers—including 17 in the U.S.—to deposit hundreds of thousands of dollars worth of BTC. The customers lost most of their money, with Mosaic using some of it to pay for Michael’s restaurant and travel expenses.
CFTC accuses Michael and Mosaic of fraud in connection with swaps and futures, fraud by a commodity pool operator, and commodity fraud. The agency wants a permanent injunction prohibiting Michael and Mosaic from violating commodity regulations, disgorgement of ill-gotten gains, restitution, and a civil monetary penalty.
In an accompanying statement, commissioner Kristin N. Johnson pledged the CFTC’s commitment to stamping out digital asset fraud in the commodities sector.
“I will continue to strongly advise investors to review the CFTC’s advisory page, and to stay vigilant and alert to potential fraud; investors should question anyone offering unusually high or riskless returns. If it sounds too good to be true, it may, in fact, not be true,” she stated.
CFTC continues to crack down on digital asset crime, filing dozens of actions against scammers this year. Last month, the agency pledged to root out criminals in the DeFi sector as Commissioner Ian McGinley believed that existing regulations are sufficient for the sector.
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