- T Filaret and M Bacina
Punishing a ponzi scheme that used bitcoin as bait
In an action brought by the Commodity Futures Trading Commission (CFTC), the US District Court for the District of Colorado has entered a judgment against defendants Venture Capital Investments LLC (VCI) and its principal for fraudulently soliciting and misappropriating funds from clients in a digital asset scheme. There were no digital assets at all purchased, in a reminder that all that glitters may not be bitcoin.
According to a press release by the CFTC:
The court ruled that the defendants fraudulently solicited more than 72 clients to invest in commodity pools that purportedly trade in forex and digital assets, including bitcoin, only to then misappropriate the money.
The defendants found pool participants through social media, email, webinars, and face-to-face meetings, ultimately soliciting $535,829 from participants, and misappropriating $450,302 of that for personal use. In a classic ponzi move, payments were made to existing pool members from the original pool of funds so it appeared as though the scheme/scam was profitable.
The defendants made a number of false claims, including:
that there was as much as between "18% weekly" or "21%" return on investment in digital assets (as we know volatility cuts both ways in the digital asset market); and
the Defendants employed a "master team of traders [who could] execute the Foreign Exchange markets with precision and accuracy."
The judgment requires that the defendants pay $450,302 back to investors, being money received of $534,829 less the purported profits returned of $84,527. The Court also ordered a civil monetary penalty of $450,302. Costs were naturally ordered against the defendants.
The CFTC was assisted by the Financial Supervision Commission of Bulgaria, the St. Vincent and the Grenadines Financial Services Authority, the Financial Services Authority of Seychelles, the United Kingdom Financial Conduct Authority, and the Financial Markets Authority of New Zealand, showing how international cooperation can take down even a (relatively) modest ponzi scheme if regulators move early and swiftly.