CFTC, the US Commodity Futures Trading Commission has charged two defendants with multiple criminal offences for attempting to steal bitcoins from their customers.
Charges Filed for Bitcoin Fraud
The US regulator earlier on Friday charged two defendants with fraudulent solicitation and other crimes. The two defendants have been identified as one using the name Morgan Hunt, purportedly of Arlington, Texas, and the other using the name Kim Hecroft, allegedly of Baltimore, Maryland. Hunt was conducting business under the name Diamonds Trading Investment House (Hunt), and Hecroft as First Options Trading (Hecroft). The charges have been filed in the U.S. District Court for the Northern District of Texas.
It is alleged that the two accused through a fraudulent scheme targeted innocent victims to solicit Bitcoin by luring them to invest in financial products (Like leveraged or margined foreign currency contracts, binary options, and diamonds). The charges also include forgery of account statements, impersonation of a CFTC investigator, and forgery of documents purportedly authored by the CFTC’s General Counsel (Bearing the image of the CFTC’s official Seal).
Statement by CFTC
James McDonald, CFTC Director of Enforcement, commented:
Increased public awareness of the CFTC’s involvement in policing the virtual currency markets has, unfortunately, provided new opportunities for bad actors. 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.
Modus Operandi
It is alleged that the defendants used social media platform Facebook and email starting January 2017 to defraud at least two victims. The accused would approach the prospects, posing as professional portfolio managers, and mislead them into believing that their funds would be used for profitable investments.
The duo used fake account statements to convince the prospects that they had a good track record of generating profits for their customers. They further made their customers believe that they could not withdraw their earnings unless they first paid a tax to CFTC. They would then misappropriate customer funds for unauthorized purposes rather than investing the funds into legitimate financial instruments.
Hunt and Hecroft, it is alleged, forged documents including a publicly available CFTC memorandum to make their victims believe that they were obligated to pay tax to CFTC. The two took help from an accomplice to impersonate as a CFTC investigator and made the 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.
This case has highlighted the need for strict punishment for such crimes that can act as a deterrent and also a need to create awareness among the gullible public about how to safeguard themselves against cryptocurrency fraudsters.
What steps in your view should be taken to prevent such frauds? How should people safeguard their Bitcoin and other crypto-assets? Let us know in the comments below.
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