The CFTC filed a civil enforcement action against an unregistered UK bitcoin trading and investment company for misappropriating $147 million in bitcoin.
According to the Complaint, Control-Finance Limited ("Control-Finance") and its principal, Benjamin Reynolds, established a complex pyramid scheme known as the "Affiliate Program." Customers were solicited to buy bitcoin with cash and deposit it with Control-Finance under the promise that they would see up to 45 percent in monthly trading profits and would be protected from bitcoin-made risks. The defendants created "Trade Reports," published on the company website, which displayed falsified statements of bitcoin transactions and profits.
The CFTC claimed the defendants misappropriated the funds by (i) conducting circuitous blockchain transactions that moved bitcoin into the wallet addresses of the defendants and (ii) illegally redirecting bitcoin deposits into the accounts of other customers when they requested withdrawals.
The defendants were charged with violating CEA Section 6(c)(1) ("Prohibition regarding manipulation and false information") and CFTC Rule 180.1(a) ("Prohibition on the employment, or attempted employment, of manipulative and deceptive devices").
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