CFTC secures order for alternative service on director of fraudulent crypto scheme Control-Finance

Maria Nikolova

The Court has allowed the regulator to effect service on Benjamin Reynolds via publication.

The United States Commodity Futures Trading Commission (CFTC) has secured a Court order to effect service on a director of fraudulent cryptocurrency scheme via publication after the regulator admitted it had trouble locating the defendant.

As per the order signed by Judge John G. Koeltl of the New York Southern District Court, the CFTC’s motion for an order authorizing alternate service on Benjamin Reynolds, Director of Control-Finance, is granted. Pursuant to Federal Rule of Civil Procedure 4(f)(3), the CFTC will have to serve Reynolds by publishing the Summons and a statement describing how a copy of the Complaint may be obtained once a week for four consecutive weeks in The Daily Telegraph. Reynolds’s deadline to respond to the Complaint shall be twenty-one days from the date of the last publication in The Daily Telegraph. The Court also granted the CFTC’s request for additional time to complete service.

In a memorandum accompanying its motion for alternative service, the CFTC explained that it had diligently attempted to serve Reynolds. Shortly after filing the Complaint (on or about July 17, 2019), the Commission retained Legal Language Services, a litigation support firm, to arrange for service on Reynolds and Control-Finance. LLS’s efforts to effect service on the defendants, however, were unsuccessful.

Also in July 2019, a CFTC staff member attempted to email the Complaint, the Summonses, the Electronic Case Filing Rules for the Southern District of New York, and the Court’s Individual Practices to the only known email addresses associated with Reynolds and Control-Finance: [email protected] and [email protected] The staff member, however, received a bounce-back message indicating that the email could not be delivered because of an “unknown address error.”

The CFTC has also learned from investors based in South Korea that the Ulsan District Prosecutors’ Office in South Korea is investigating the scheme run by Control-Finance. CFTC staff spoke with a contact in South Korea’s Supreme Prosecutors’ Office about that investigation in October 2019. Through additional communications with the Supreme Prosecutors’ Office, the Commission understands that the investigation in South Korea is ongoing, but to date the prosecution team there has not been able to locate Reynolds.

The CFTC made other attempts to contact Reynolds, including via phone, but those were not successful either.

The CFTC Complaint alleges 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.

In this action, the US regulator seeks civil monetary penalties and ancillary relief, including but not limited to permanent trading and registration bans, restitution, and disgorgement.

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