The Commodity Futures Trading Commission announced it is taking legal action against Cash FX Group and three people regarding a $950 million digital currency foreign-exchange investment fraud.
The accused parties are Cash FX along with its chief executive Huascar Jose Lopez Castillo from Brazil, The Conversion Pros alongside its chief executive Ronald Pope based in Oregon, and Justin Halladay from Florida.
The CFTC stated that its legal petition was submitted on Friday to the US District Court for the Middle District of Florida. The filing claims that the accused ran a multi-level marketing Ponzi operation, gathering and taking in more than $950 million under the pretense of engaging in retail foreign currency trades within a commodity pool.
The regulatory body claimed the defendants untruthfully asserted that pool assets were managed by professional traders, exclusive algorithms, and artificial intelligence, while guaranteeing weekly gains of up to 15%.
The CFTC argued that Cash FX carried out very little forex trading and instead embezzled the vast majority of investor capital, employing incoming cash from participants to hand out fake trading gains while funneling millions of dollars directly to each individual defendant.
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Cash FX additionally supplied misleading financial reports to investors, who suffered losses totaling at least $406 million, according to the CFTC allegations.
“The Division of Enforcement has continued to refocus on its core mission of protecting the public from fraud and manipulation,” said Director of Enforcement David I. Miller. “This critical action, and the massive fraud it targets, reflects our steadfast commitment to addressing fraud wherever we find it.”
Cointelegraph reported on September 18 that the CFTC had delivered a fresh regulatory proposal concerning digital asset trading and markets for review by the White House, as the watchdog advances its strategy for supervising the cryptocurrency space.
Although specifics of the proposed rules were kept private, the filing occurred just days after the Senate was unable to pass the CLARITY Act, a bill designed to create a national regulatory system for digital asset markets.
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