CFTC Fines Arizona Resident For Fake Cryptocurrency Trading Scheme

Kim Illegally Transferred Employer’s Tokens

The U.S. Commodity Futures Trading Commission (CFTC) fined Joseph Kim, an Arizona resident, for a fake cryptocurrency trading scheme. Kim trapped his former employer and other investors in this scheme. The Northern District of Illinois District Court found Kim guilty of wire fraud charges and announced a sentence of 15 months for him. The CFTC says that Kim transferred the tokens of his former employer, a Chicago trading firm, from the cryptocurrency exchange. He misappropriated the funds between September and November last year and kept the tokens in his personal crypto wallet. While answering the questions on illegal transfers, Kim made a false statement that he made the transfer due to security issues of the platform.

The company found out about the scam in November 2017. However, by that time, Kim lost around $601,000 of his former employer. As a result, the Chicago firm fired him. Incidentally, Kim did not stop after the company threw him out. He came up with another idea to defraud investors. The trader started soliciting investment funds from innocent investors telling them that he is starting his new company after leaving the firm. He managed to get investment from five investors of around $545,000 for investing in the crypto market. However, poor investment decisions led to a complete wipeout of these investments. To cover these losses, Kim sent false account statements to the investors reflecting profits.

CFTC Fined Kim $1.146 Million 

Kim will have to pay a fine of $1.146 million as restitution to the investors and his former employer. The agency also disqualified Kim from trading and banned his registration for soliciting of funds and crypto trading. According to James McDonald, the Director of Enforcement, the issued order is in the interest of “commitment to actively police the virtual currency markets and protect the public interest.”

Apart from CFTC, the U.S. Securities and Exchange Commission (SEC) is also actively taking a stand against such fraudulent schemes in the cryptocurrency world. The commission has been enforcing new regulations to curb such cases of fraud and scams. Last week the agency charged EtherDelta, a cryptocurrency exchange for running a national securities exchange without registering it with SEC. Other two firms that faced similar consequences in September 2018 include Crypto Asset Management LP and TokenLot LLC.

The brokerage department of SEC, Financial Industry Regulatory Authority (FINRA) is also aggressively checking up with trading companies in the crypto industry. Recently FINRA investigated Rocky Mountain Ayre Inc. (RMTN), a publicly traded company. The authority charged the CEO of RTMN, Timothy Tilton Ayre for distributing the unregistered security unlawfully.

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