NY Court orders Bitcoin scammer to pay $571 million
Benjamin Reynolds claimed he and his company would make all customers whole by returning their Bitcoin deposits, minus any prior payments, by late October or November 2017. In reality, they laundered nearly one hundred fifty million dollars in misappropriated Bitcoin through thousands of circuitous blockchain transactions.
The U.S. District Court for the Southern District of New York has found Benjamin Reynolds guilty of soliciting Bitcoin and misappropriating customers’ assets in a fraudulent scheme under the business name of Control-Finance Limited.
The case, brought in connection with the CFTC’s Digital Assets Task Force, has resulted in a court order requiring Mr. Reynolds to pay nearly $143 million in restitution to defrauded customers and a civil monetary penalty of $429 million.
Benjamin Reynolds is also barred from registering with the CFTC, and trading in any CFTC-regulated markets.
The CFTC enforcement action in 2019 charged Benjamin Reynolds for using a public website, various social media accounts, and email communications to solicit at least 22,190.542 bitcoin, valued at approximately $143 million at the time, from more than 1,000 customers worldwide, including at least 169 individuals residing in the U.S.
The fraudulent scheme took place between May 2017 and October 2017, as he falsely represented to customers that Control-Finance traded their bitcoin deposits in virtual currency markets and employed specialized virtual currency traders who generated guaranteed trading profits for all customers.
His affiliate marketing network relied on the promise of outsized referral profits, rewards, and bonuses to encourage customers to refer new customers to Control-Finance.
The CFTC found that Mr. Reynolds made no trades on customers’ behalf, earned no trading profits for them, and paid them no referral rewards or bonuses.
He never returned the Bitcoin to investors. Instead, he retained the deposits for his own personal use. Victims may never recover any money lost because the wrongdoer may not have sufficient funds or assets.
The CFTC worked in collaboration with the British Columbia Securities Commission and the UK Financial Conduct Authority as Benjamin Reynolds was purportedly based in Manchester, England.
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 the bulk of these transactions through wallet addresses that the defendants opened at CoinPayments of Vancouver, Canada.