Despite his promises, Pinillo had created no trading platform whatsoever, was doing no crypto trading, and simply pocketed all the money. Any payments made to his customers during the fraud were taken from newer investors, in classic Ponzi fashion.
Former pastor charged with crypto scheme in which he stole $5.9 million from his former congregants
The CFTC has filed suit against Francier Obando Pinillo, an American former pastor who targeted his former congregants and other unsophisticated investors with a crypto pyramid scheme called "Solanofi". He promised victims that his supposed automated trading system was "risk free", and that they would earn guaranteed profits as high as almost 35% compounded monthly — which he "proved" to them with an online dashboard showing faked balances. They were also encouraged to recruit friends and family, and incentivized with referral fees.
- "CFTC Charges Washington State Pastor with Fraud, Misappropriation in Multilevel Marketing Scheme Targeting Hispanic Americans", US Commodity Futures Trading Commission [archive]
FTX settles complaint from the CFTC with $12.7 billion payout
FTX will pay $8.7 billion in restitution and another $4 billion in disgorgement to settle the lawsuit from the CFTC, which was filed shortly after FTX collapsed in November 2022. All $12.7 billion, or what is available of it among FTX's remaining assets, will go to creditors rather than to the agency.
Defendants Sam Bankman-Fried, Caroline Ellison, and Gary Wang, as well as the FTX and Alameda Research companies, will be prohibited from commodities trading, including trading bitcoin, ether, USDT, or other assets considered "digital asset commodities" by the CFTC. However, with Bankman-Fried already beginning a 25-year prison sentence, and Ellison and Wang due to be sentenced, this may be low on their list of worries.
- "Judge approves $12.7 billion settlement between FTX and CFTC, bringing 20-month-long lawsuit to an end", The Block [archive]
- Permanent injunction, document #44 in CFTC v. Bankman-Fried [archive]
CFTC subpoenas former company of Ben "BitBoy" Armstrong over crypto promotion
The CFTC has sent a subpoena to Hit Network, the crypto media company that was previously headed up by Ben "BitBoy" Armstrong until his rather public meltdown. According to The Block, the subpoena requested information about fifteen tokens, including the BitBoy-themed $BEN token, and the videos in which figures including BitBoy talked up their potential for price appreciation. The CFTC noted that the investigation was into a person who had engaged in crypto fraud.
CFTC files complaint against Debiex platform for using "romance scam tactics" to steal $2.3 million
The CFTC has filed a complaint against Debiex, a shadowy cryptocurrency platform whose precise location and executives are unknown. The company's employees primarily targeted Chinese Americans, and used common romance scam techniques: first striking up a friendship or romantic relationship with the victim, then convincing them that they could earn huge profits by putting money on Debiex.
Debiex, however, only resembled a cryptocurrency trading platform. In reality, the website merely mimicked a trading platform, and the funds supposedly deposited there for trading purposes were taken by Debiex.
The CFTC identified five victims who were allegedly defrauded of a combined $2.3 million.
CFTC and FTC sue Voyager CEO Stephen Ehrlich
Simultaneous civil lawsuits from the Commodity Futures Trading Commission (CFTC) and Federal Trade Commission (FTC) against former CEO of the collapsed Voyager crypto lender accuse him of fraud and making deceptive claims to customers.
The FTC lawsuit focuses on Voyager's claims suggesting to customers that accounts with the lender were FDIC insured. That complaint also names Voyager as a defendant. Voyager settled with the FTC, agreeing to pay a $1.65 billion judgment that will be suspended until customers are repaid.
- "CFTC Charges Former Chief Executive Officer of Digital Asset Platform with Fraud in Massive Commodity Pool Scheme", CFTC press release [archive]
- "FTC Reaches Settlement with Crypto Company Voyager Digital; Charges Former Executive with Falsely Claiming Consumers' Deposits Were Insured by FDIC", FTC press release [archive]
- "CFTC and FTC sue former CEO of bankrupt crypto lender Voyager", BlockWorks [archive]
- "Voyager Ex-CEO Charged by U.S. Regulators With Fraud, Making False Claims", CoinDesk [archive]
CFTC goes after three defi projects
The CFTC has announced charges and settlements against defi projects Opyn, ZeroEx, and Deidex for various commodities law violations. The projects will pay $250,000, $200,000, and $100,000, respectively, to settle the charges. They have also agreed to cease and desist the activities.
The CTFC stated: "Somewhere along the way, DeFi operators got the idea that unlawful transactions become lawful when facilitated by smart contracts. They do not."
SEC, CFTC, and FTC sue Celsius; CEO Alex Mashinsky arrested
A multi-agency hammer came down on the bankrupt cryptocurrency lender and alleged Ponzi scheme that was Celsius. The co-founder and former CEO of the company, Alex Mashinsky, was arrested and charged with seven counts including securities and commodities fraud, wire fraud, and conspiracy to manipulate the price of Celsius' CEL token. The indictment also named Roni Cohen-Pavon, Celsius' former Chief Revenue Officer.
Alongside the indictment from the DOJ, the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Federal Trade Commission (FTC) each filed their own separate lawsuits against Mashinsky and Celsius.
These latest lawsuits join an existing lawsuit, filed in January 2023, against Mashinsky by the New York Attorney General.
Digitex Futures CEO to pay $15 million over commodities violations
Adam Todd, the CEO of the Digitex Futures exchange, has been ordered to pay $3.9 million in disgorgement and $11.7 million in penalties. The Commodity Futures Trading Commission won a default judgment against him in their lawsuit alleging violations of the Commodity Exchange Act, including failing to register as a derivatives exchange, attempting to manipulate the price of the DGTX token, and failing to implement proper KYC and anti-money laundering programs.
According to Todd in a YouTube video, "We do not need to do KYC. [...] You should not have to give them because the U.S. government or whatever other [expletive] government in the world says that you need to. You do not need to. You just do not." Well, in that case.
Todd was also accused of trying to artificially inflate the price of the DGTX token by buying it on third-party exchanges, writing out his plans in excruciating detail with a customer who provided him funds to use on pumping the token.
CFTC awarded default judgment in case against Ooki DAO
Ooki DAO was sued in September of last year for allowing illegal trading of digital assets, engaging in activities only allowed by registered futures commission merchants, and not performing proper KYC. It was a potentially landmark case, as one of the first actions to be taken against a DAO and an opportunity to test various DAOs' claims that by decentralizing governance, they can skirt regulatory enforcement.
Now, a judge has awarded default judgment in the case, requiring the DAO to pay a more than $640,000 penalty, close down its website, and stop trading.
The court held that the Ooki DAO was a "person" under the Commodity Exchange Act and thus could be held liable for violations of the law.
- Order on Motion for Default Judgment, Commodity Futures Trading Commission v. Ooki DAO
CFTC imposes record $3.4 billion fine on Bitcoin scammer
After finding that the South African businessman Cornelius Johannes Steynberg had run Mirror Trading International as a multi-level marketing scheme, in which he accepted 29,421 Bitcoin from at least 23,000 Americans, the CFTC has imposed a record fine. Those 29,421 BTC were priced at $1.7 billion in March 2021 — around the end of Steynberg's multi-year scam. Today they're priced at around $863 million, but unfortunately for Steynberg, the CFTC isn't using today's prices to calculate their penalties.
Steynberg has been ordered to pay a total of $3.4 billion — $1.7 billion in restitution and another $1.7 billion penalty. Steynberg was arrested in Brazil in December 2021 on an INTERPOL arrest warrant, where he has remained since pending extradition.
- "Federal Court Orders South African CEO to Pay Over $3.4 Billion for Forex Fraud", U.S. Commodity Futures Trading Commission