Cryptocurrency fraud is and always has been a problem in the financial space, but it’s rare that a scam of this magnitude comes along. A man in the U.K. is being ordered to pay a financial penalty of approximately $571 million by a U.S. court following the implementation of a phony bitcoin operation that saw him earn more than 22,000 BTC from unsuspecting victims.
A Major Bitcoin Scam Occurred Four Years Ago
The penalty is being enforced by the Commodity Futures Trading Commission (CFTC), the organization that oversees bitcoin and all its trading activities via exchanges, digital platforms and anywhere else the cryptocurrency is sold. Overall, it’s estimated that as many as 1,000 separate customers – including more than 160 in the U.S. – took part in the scam back in 2017, a time when bitcoin – at least back then – was doing better than it ever had.
During that year, the scam was worth approximately $143 million, though nobody could have predicted the $50,000 and $60,000 marks that bitcoin would hit just a few years later. Nowadays, the scam is worth approximately $1.22 billion, suggesting people have lost quite a bit.
The man potentially behind the scheme is named Benjamin Reynolds, a citizen of Great Britain. While his exact location is unknown at the time of writing, the CFTC is claiming that he is likely based in Manchester, England. The total financial penalty is made up of two separate parts. The first is restitution, which consists of the $143 million that was allegedly stolen from customers back in 2017.
The second is a standard civil penalty that must be given to the CFTC. This portion is considerably larger at a whopping $429 million. Reynolds was initially due to make an appearance in one of New York’s many southern district courts, though Reynolds “failed to appear” or “answer the complaint” according to judge Mary Kay Vyskocil, who’s overseeing the case.
Reynolds’ company – known as Control-Finance – was registered in September 2016. Using a website with the company’s name on it, Reynolds solicited bitcoins from several individuals, promising to invest these coins on their behalf and produce guaranteed results, though according to the CFTC, this is not what happened, and no investments were ever made for customers of Control-Finance.
Time to Face the Music
In a statement, the CFTC mentioned:
Among other things, Reynolds falsely represented to customers that Control-Finance traded their bitcoin deposits in virtual currency markets and employed specialized virtual currency traders who generated guaranteed trading profits for all customers… In fact, Reynolds made no trades on customers’ behalf, earned no trading profits for them, and paid them no referral rewards or bonuses.
The judgement against Reynolds says that the financial penalty he’s due to pay will accrue interest if it’s not taken care of within a specified timeframe. In addition, Control-Finance was listed as “dissolved” in early 2018.