The Commodity Futures Trading Commission (CFTC) announced on March 26 that a federal court in Manhattan had ordered a UK-based man to pay $571 million in fines for defrauding people out of over 20,000 Bitcoin.
It has entered a default judgement against Benjamin Reynolds, purportedly of Manchester, England, for running a fraudulent scheme to solicit Bitcoin from members of the public and misappropriating customers' bitcoin.
Reynolds must pay almost $143 million in restitution to defrauded consumers and a civil monetary penalty of $429 million under the court's March 2, 2021 order. Reynolds is also indefinitely barred from violating the Commodity Exchange Act and CFTC rules, registering with the CFTC, and trading in any CFTC-regulated markets, according to the order.
How he duped his customers?
Between May 2017 and October 2017, Reynolds solicited at least 22,190.542 bitcoin, estimated at about $143 million at the time, from over 1,000 customers worldwide, including at least 169 people in the United States, via a public website, various social media pages, and email communications.
Reynolds deceived customers into thinking that Control-Finance exchanged their bitcoin deposits in virtual currency markets and hired specialist virtual currency traders who promised all customers trading income. He also built an intricate affiliate marketing network that enticed customers to refer new customers to Control-Finance by falsely promising to offer outsized referral profits, incentives, and bonuses.
Reynolds, in reality, made no trades on behalf of clients, received no trading gains for them, and did not pay them any referral incentives or rewards. Reynolds promised to refund all bitcoin deposits to Control-Finance customers by late October 2017, but he never did, instead of keeping the funds for his own personal use. As a result of the scheme, customers lost much or all of their bitcoin deposits.
The record $6 billion expiries in the bitcoin options market on Friday turned out to be a non-event as prices for the world's largest cryptocurrency grew steadily, with no indication of the anticipated fall to the $44,000 "peak pain" stage.