CFTC seeks $429m penalty to be imposed on director of cryptocurrency scam Control-Finance
The proposed default judgment against Benjamin Reynolds also envisages restitution of nearly $143 million.
In line with FinanceFeeds’ earlier reports, the United States Commodity Futures Trading Commission (CFTC) has submitted a proposed default judgment against Benjamin Reynolds, the sole director and owner of fraudulent cryptocurrency scheme Control-Finance.
The document, filed with the New York Southern District Court on August 20, 2020, the CFTC explains that Reynolds failed to appear or answer the CFTC’s Complaint.
According to the proposed default judgment, Reynolds will have to pay restitution in the amount of $142,986,589. Also, he will have to pay a civil monetary penalty in the amount of $429,000,000.
The proposed judgment also includes permanent injunction. Reynolds will be permanently restrained, enjoined, and prohibited from, inter alia, trading on or subject to the rules of any registered entity, entering into any transactions involving “commodity interests” and/or the virtual currency Bitcoin.
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.