US Regulator Accuses Head of Defunct British Bitcoin Company of $147 Million Fraud

A US commodities regulator has filed a lawsuit accusing a defunct British cryptocurrency company and its former principal of fraudulently misappropriating at least 22,858,322 Bitcoin worth $147 million (roughly Rs. 1,000 crores) from more than 1,000 customers.

In a complaint filed on Monday, the US Commodity Futures Trading Commission said Control-Finance and Benjamin Reynolds "exploited public enthusiasm" for Bitcoin by falsely representing that their "expert" traders could generate profits of 1.5 percent a day, or 45 percent a month, from it.

The CFTC said the defendants in reality did no trading and made no profits for customers, even as they promised rewards in the form of Bitcoin for referring new customers.

Control-Finance and Reynolds were also accused of creating "sham" customer account balances and profit statements, and making "Ponzi scheme-like payments" to customers requesting withdrawals to conceal the fraud and feign profitability.

It was unclear on Tuesday whether Reynolds has a lawyer, and Reynolds could not immediately be reached for comment.

The lawsuit, filed in the US district court in Manhattan, seeks civil fines, restitution, an injunction against further violations of US commodity laws, and other remedies.

Losses from cryptocurrency theft or misappropriation totalled about $1.21 billion in the first quarter of 2019, or about 70 percent of the total for all of 2018, the cyber-security firm CipherTrace said in April.

Control-Finance was dissolved by a British regulator in February 2018, the complaint said.

The case is Commodity Futures Trading Commission v Control-Finance, US District Court, Southern District of New York, No. 18-05631.

© Thomson Reuters 2019