Bankruptcy cannot save cryptocurrency fraudster as CFTC presses ahead with legal action

Maria Nikolova

The CFTC continues its action against alleged cryptocurrency fraudster Patrick McDonnell.

Patrick McDonnell, the person behind fraudulent cryptocurrency scheme CabbageTech, Corp. aka Coin Drop Markets (CDM), has tried to stay a legal action against him by filing for bankruptcy protection. He got nowhere with that.

As per the latest filings with the New York Eastern District Court, seen by FinanceFeeds, the defendant submitted a notice that he had filed a voluntary bankruptcy petition. One of the ideas behind such a move is to have legal actions against the bankrupt entity stayed. But the Commodity Futures Trading Commission (CFTC) did not agree to such a stay.

In a letter filed with the Court on Tuesday, the CFTC argued that the automatic stay for bankruptcy proceedings does not apply to this action. “In particular, the law specifically excludes from the automatic stay certain matters, including an action by a federal agency like the CFTC enforcing its regulatory powers”, the regulator noted.

The Court said that in the face of the filing for bankruptcy by the defendant, the proceedings continue. For instance, the settlement conference set for today will be held. Moreover, Mr McDonnell must attend the conference in-person, the Judge ordered.

McDonnell and his companies are charged with fraud and misappropriation in connection with purchases and trading of Bitcoin and Litecoin. Last week, the alleged Bitcoin fraudster filed his response to the CFTC complaint. He disagreed with all allegations made by the CFTC and insisted that virtual currencies are not commodities and, hence, the CFTC has no right to take an enforcement action against him.

In his reply, McDonnell said the CFTC complaint is “financially and politically motivated created out of thin air to secure the U.S. regulatory sphere surrounding Bitcoin and Virtual Currency markets”. He also claimed that “the Chicago Mercantile Exchange (“CME”) was financially motivated to join the case”.

In conclusion, McDonnell said he was “a sacrificed pawn in a bigger game, this case in not about a “so-called” fraud or misappropriation of investor funds, it is about controlling Bitcoin which has become a threat to world financial systems”.

Read this next

Digital Assets

Monex Group expands crypto business with 3iQ takeover

Monex Group has completed the acquisition of a majority stake in 3iQ Digital Holdings, Inc., a Canadian digital asset investment fund manager, as part of its strategy to expand its crypto business.

Education, Fintech, Inside View

How to Get Into Fintech: Best Tips to Succeed

The Fintech sector is experiencing significant growth, with fresh opportunities emerging rapidly.  Innovations such as machine learning and cryptocurrency are revolutionising finance, leading to a need for trained experts.

Digital Assets

FalconX launches Prime Connect on Deribit

“We are pleased to launch Prime Connect with Deribit and look forward to providing our full suite of prime services which allow institutions to confidently scale their digital assets portfolios while trading on exchanges.”

Retail FX

Lion launches multi-currency trading accounts powered by AI

The core advantages of multi-currency trading account services include enabling significant cost savings and higher efficiency for investors.

Inside View, Interviews

Interview: Stanislav Bunimovich on Finalto’s white label solution

To explore what makes Finalto’s white-label solutions stand out in such an incredibly competitive market, Finalto sat down with its Chief Operating Officer, Stanislav Bunimovich, for an interview. 

Digital Assets

Talos acquired Cloudwall for a better portfolio management system

Cloudwall’s additional expertise in portfolio risk systems further positions Talos at the forefront of portfolio management systems across spot, futures, perps, and options.

Digital Assets

Bybit’s Bitcoin market share explodes, up by 400%

“This milestone is a testament to our sharp trading products and the loyalty of our users. As the industry evolves, Bybit remains at the forefront, ready to set new standards in the crypto trading world.”

Crypto Insider

Why Self-Custody is the Key to Secure Crypto Trading

Crypto trading is fast gaining popularity; as of writing, the total market capitalization stands at $2.3 trillion, double what it was at the onset of the 2021 bull market.

Industry News

UK FCA sues Lee Steven Maggs for FX scam Kube Trading

‘Kube Trading’ allegedly received around £2.67 million for FX trading and concealed significant losses from investors.