25.07.2024

Cryptocurrency trader fined $ 572 million for creating fraudulent scheme

A New York federal judge ordered a British cryptocurrency trader to pay $ 572 million in fines and compensation for creating a massive financial pyramid in the blockchain asset space.

In a ruling in March 2021, US District Judge Mary Kay Viscosil confirmed the findings of the US Commodity Futures Trading Commission (CFTC) that a certain Benjamin Reynolds committed several fraudulent acts. He was ordered to pay $ 429 million in fines and $ 143 million in compensation. We will tell you more about the reasons for such a heavy punishment.

To begin with, let us remind you that there are a lot of fraud cases in the blockchain asset industry. In particular, according to analysts at CipherTrace, in 2020 cryptocurrency scammers and hackers received the equivalent of $ 1.9 billion as a result of their activities. To do this, they hack cryptocurrency exchanges and create fake projects to steal coins.

Also relevant is a banal way of «distribution» of cryptocurrencies on behalf of a celebrity. That is, the criminals talk about the bonus accrual of coins in honor of some event and promise to double the amount of coins that will be sent to the victims of the scheme to the specified address. In this case, the money remains with the fraudsters, and we are not even close to «doubling» the funds.

Although this tactic is very simple, it still brings criminals a lot of money. As we learned in January of this year, scammers posing as Elon Musk “earned” more than $ 580,000.

Examples of scams in the cryptocurrency industry

The ruling came after Reynolds failed to respond to a complaint from the US Commodity Futures Trading Commission back in June 2019. According to the complaint, Reynolds – the director of the defunct trading firm Control-Finance Ltd – convinced over 1,000 clients to collectively invest 22,858 BTC in his scheme between May and October 2017.

At that time, the coins were worth approximately $ 143 million: hence the $ 143 million in compensation for the victims, Decrypt reports. However, now their market value already exceeds the billion dollar mark.

Note that 169 out of 1,000 attracted clients are US residents. This was the reason for the proceedings in the American court.

cryptocurrencies Bitcoin blockchain

The security of cryptocurrencies is the responsibility of only their owner

Clients transferred bitcoins to Control-Finance, believing that the firm’s “experts” would trade with the borrowed funds and pay profits on an ongoing basis, because this is exactly what its representatives promised. Naturally, no one made any transactions, Reynolds did not hire traders, and he used the funds raised only to meet his own needs.

That is, the problem of the victims of deception was that they wanted easy money and hoped for the decency of strangers. In addition, the lack of experience affected, because usually only beginners can entrust their funds to someone else in the cryptocurrency industry. They were promised big profits thanks to «advanced» coin trading, which would be done by outside traders.

In October 2017, his company ceased to exist, with the suspect trying to hide the traces of his cryptocurrency transactions and withdraw the stolen coins into regular currency.

Fraud in the digital asset industry is only gaining traction in a bull market. Remember that promises of «easy profit» are more like «free cheese» in a mousetrap and are more likely to result in a loss of funds. Therefore, we recommend that you do not get involved with such schemes and do not trust anyone in the industry.

Experience shows that the usual «holding» of good cryptocurrencies with active developers brings excellent profits over a long period of time. In addition, in this case, coins can be stored on hardware wallets, that is, not to depend on what is happening on cryptocurrency exchanges and other similar services.

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