CFTC charges three for $44m Bitcoin Ponzi scheme
CFTC Commissioner Dawn Stump issued a separate statement just to clarify that the CFTC regulates cash or “spot” transactions in Bitcoin or other digital assets.
The Commodity Futures Trading Commission has charged Dwayne Golden, Jatin Patel of India, Marquis Egerton, and Gregory Aggesen with fraud for operating Ponzi schemes involving bitcoin.
The individuals have solicited more than $44 million of investments and misappropriated millions of dollars, according to the complaint, which seeks restitution, disgorgement, civil monetary penalties, permanent trading and registration bans.
“This case illustrates how fraudsters never tire of devising schemes to separate people from their hard-earned money, and digital asset frauds are no exception,” said Acting Director of Enforcement Vincent McGonagle.
Empowercoin, Ecoinplus, and JetCoin
The CFTC claims that Golden, Patel, and Egerton operated the websites Empowercoin and Ecoinplus, which have raised more than $23 million of bitcoin and misappropriated $9.8 million worth of bitcoin.
In addition, Golden, Patel, Aggesen, and an accomplice, operated the website JetCoin, which raised another $21 million of bitcoin and misappropriated approximately $7.8 million worth of Bitcoin.
In exchange, the websites promised that professionals would trade their bitcoin with profits being paid daily. In a typical Ponzi scheme, customer’s bitcoins were either misappropriated or used to make supposed profit payments.
CFTC does not regulate cash or spot transactions in Bitcoin
CFTC Commissioner Dawn Stump issued a separate statement on the matter to ensure the public is not misled to believe that the CFTC regulates cash or “spot” transactions in Bitcoin or other digital assets.
“Because this point seems to be confused from time to time, I want to be very clear that the CFTC regulates derivatives (e.g., futures contracts, options, swaps) associated with underlying commodities, but not the underlying commodities themselves. In other words, the CFTC regulates futures on Bitcoin because Bitcoin is a commodity – but the CFTC does not regulate Bitcoin itself (much like the CFTC regulates cattle futures because cattle are commodities, but it does not regulate the sale of cattle at auction barns throughout the country)”, she explained.
“While the CFTC does not regulate cash commodities, it does have authority to prosecute enforcement actions in cases of fraud or manipulation involving cash commodities – including Bitcoin (as here). That is, where cash commodities are concerned, anti-fraud and anti-manipulation enforcement authority (as opposed to day-to-day regulatory oversight) is bestowed upon the CFTC as a tool to assist in its primary function of regulating derivatives products, such as futures. However, the CFTC is not in the business of regulating Bitcoin transactions or the individuals or entities that buy, sell, trade, transfer, or store Bitcoin.”
“As a result, those who seek to trade Bitcoin cannot rely upon the protections afforded by CFTC regulation and oversight. The CFTC should be very clear about that so as not to give the public a false sense of security that when they engage in cash transactions involving Bitcoin or other digital assets, they enjoy the protection of CFTC regulatory oversight. They do not.”
“If the CFTC is to fulfill its customer protection mission, it must make this clear whenever it takes enforcement action involving digital assets: The CFTC does not regulate cash or spot transactions involving digital assets such as Bitcoin (or any other cash commodity), or those who buy, sell, or engage in activities relating to digital assets (or any other cash commodity).”