CFTC launches action against UK-based crypto scheme Control-Finance

Maria Nikolova

The CFTC alleges Control-Finance Limited and its Director Benjamin Reynolds exploited public enthusiasm for Bitcoin by operating a $147 million fraudulent scheme.

The United States Commodity Futures Trading Commission (CFTC) on Monday launched an action against now-defunct UK cryptocurrency scheme Control-Finance Limited and its Director Benjamin Reynolds. The defendants are charged with fraud by deceptive device or contrivance.

The CFTC Complaint, filed with the New York Southern District Court and seen by FinanceFeeds, says that, 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.

From at least May 1, 2017, through October 31, 2017, the defendants solicited customers to purchase their own Bitcoin with cash and thereafter deposit their Bitcoin with the defendants. To lure customers to transfer Bitcoin to them, the defendants made a raft of misrepresentations – for instance, they claimed that they employed expert virtual currency traders who earned guaranteed daily trading profits on customers’ Bitcoin deposits.

Further, 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.

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.

Accordingly, the CFTC brought this action to permanently enjoin the defendants from further violations of the Act and Regulations and to seek civil monetary penalties and ancillary relief, including but not limited to permanent trading and registration bans, restitution, and disgorgement.

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