The Commodity Futures Trading Commission said it is suing Cash FX Group and three individuals in a $950 million foreign-exchange investment case involving cryptocurrency.
The defendants are Cash FX and its CEO Huascar Jose Lopez Castillo of Brazil, The Conversion Pros and its CEO Ronald Pope of Oregon, and Justin Halladay of Florida.
The CFTC said its complaint was filed Friday in the US District Court for the Middle District of Florida. It alleges the defendants operated a multilevel marketing Ponzi scheme, soliciting and accepting over $950 million for the purported purpose of trading retail foreign currency contracts in a commodity pool.
The agency alleged the defendants falsely claimed pool funds were handled by expert traders, proprietary algorithms and artificial intelligence, and promised up to 15% weekly returns.
The CFTC alleged that Cash FX engaged in minimal forex trading and misappropriated most of the participant funds, using new contributions from participants to pay fictitious trading profits while directing millions of dollars to each defendant.
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Cash FX also provided false accounting statements to participants, who lost at least $406 million, the CFTC alleged.
“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 Sept. 18 that the CFTC had submitted a new regulatory action covering crypto asset transactions and markets for White House review, as the agency moves forward with its approach to overseeing the digital asset sector.
While details of the planned regulations were not disclosed, the submission came days after the Senate failed to advance the CLARITY Act, legislation aimed at establishing a federal regulatory framework for crypto markets.
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