CFTC to push for default judgment against director of fraudulent crypto scheme Control-Finance
The regulator is currently in the process of preparing its motion for default judgment against Benjamin Reynolds.
The United States Commodity Futures Trading Commission (CFTC) has provided an update regarding its action against fraudulent cryptocurrency scheme Control-Finance and its director Benjamin Reynolds.
On Monday, July 6, 2020, the regulator submitted a Letter with the New York Southern District Court. The document, seen by FinanceFeeds, explains that the CFTC plans to move for a default judgment. The regulator has already secured a Certificate of Default against Reynolds due to his failure to plead or otherwise defend this action. In April, the Commission also filed a Notice of Voluntary Dismissal pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(i) seeking to dismiss Defendant Control-Finance Limited from the action. The Court entered an order dismissing Control-Finance from the action on April 6, 2020.
The Commission is now in the process of preparing its motion for default judgment against Reynolds. Subject to the Court’s approval, the CFTC intends to file the motion within forty-five days of the filing of this letter, i.e., on or before August 20, 2020.
According to the CFTC Complaint, since at least May 1, 2017, through the present, Control-Finance Limited and Reynolds exploited public enthusiasm for Bitcoin by operating a fraudulent scheme to misappropriate at least 22,858.822 Bitcoin, which reached a valuation of over $147 million, from more than 1,000 customers.
The defendants diverted portions of new customers’ Bitcoin deposits to other customers in the manner of a “Ponzi” scheme, falsely representing that these misappropriations were in fact profits generated from virtual currency trading.
The defendants used the Control-Finance website, as well as social media websites including Facebook, YouTube, and Twitter, to construct an elaborate pyramid scheme they called the Control-Finance “Affiliate Program.”
On or around September 10, 2017, the defendants suddenly terminated operations by removing the Control-Finance website from the Internet, halting payments to customers and Affiliate Program members, and deleting advertising content from the defendants’ Facebook, YouTube, and Twitter accounts.
The defendants, however, continued to claim, through email and Facebook that they would make all customers whole by returning their Bitcoin deposits, minus any prior payments, by late October or November 2017.
In reality, the defendants laundered nearly one hundred fifty million dollars in misappropriated Bitcoin through thousands of circuitous blockchain transactions. The defendants routed bulk of these transactions through wallet addresses that the defendants opened at CoinPayments of Vancouver, Canada.
In this action, the CFTC seeks civil monetary penalties and ancillary relief, including but not limited to permanent trading and registration bans, restitution, and disgorgement.