CFTC charges two for bitcoin fraud
The US Commodity Futures Trading Commission (CFTC) has charged two defendants with multiple criminal offences, including misleading investors and impersonating regulators in their attempts to steal bitcoin from customers.
Reports suggest that the two defendants are identified as Morgan Hunt of Arlington, Texas and Kim Hecroft of Baltimore, Maryland. Hunt conducted business under the name Diamonds Trading Investment House and Hecroft as First Options Trading.
The two accused allegedly operated a fraudulent scheme that encouraged individuals to invest in financial products that included leveraged or margined foreign currency contracts, binary options, and diamonds.
The charges extend further to forgery of account statements, impersonation of a CFTC investigator, and forgery of documents purportedly authored by the CFTC’s general counsel and bearing the image of the CFTC’s official seal.
Opportunities for bad actors
“Increased public awareness of the CFTC’s involvement in policing the virtual currency markets has, unfortunately, provided new opportunities for bad actors,” commented James McDonald, CFTC director of enforcement. “As alleged in the Complaint, Defendants sought to exploit public trust in the CFTC through forged documents purporting to be official CFTC memoranda requiring the payment of a tax on cryptocurrency accounts. The CFTC does not collect taxes.
“The CFTC is on guard against fraudsters who try to take advantage of the CFTC’s reputation in order to cheat customers, and will take swift action against such misconduct.”
Beginning in January 2017, the defendants are believed to have used social media platform Facebook and emails to defraud at least two victims. They would approach the prospects, posing as professional portfolio managers and assuring them that their funds would be used for profitable investments.
The duo used fake account statements to convince prospects they had a good track record of generating profits for their customers, who were also led to believe that they could not withdraw their earnings unless they first paid a tax to CFTC. Hunt and Hecroft would then misappropriate customer funds for unauthorised purposes rather than investing the funds into legitimate financial instruments.
The deceit also involved forging documents, including a publicly available CFTC memorandum, to make their victims believe that they were obligated to pay tax to CFTC. The two were helped by accomplice who impersonated a CFTC investigator and made customers to transfer Bitcoins to their wallet under the pretext of paying a tax.
The CFTC has sought restitution to defrauded persons, disgorgement of ill-gotten gains, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act and CFTC regulations.