CFTC sues Cash FX over alleged $950m crypto-linked forex scheme
The US commodities regulator has accused Cash FX Group and three individuals of running a multilevel marketing Ponzi scheme that took in more than $950 million from participants.
Key points
- The CFTC filed its complaint on Friday in the US District Court for the Middle District of Florida.
- Defendants named are Cash FX and CEO Huascar Jose Lopez Castillo, The Conversion Pros and CEO Ronald Pope, and Justin Halladay.
- The agency alleges the scheme solicited over $950 million for a purported retail forex commodity pool.
- Participants lost at least $406 million, according to the CFTC, which says most funds were misappropriated.
- The CFTC says the defendants promised returns of up to 15% a week and cited algorithms and artificial intelligence.
The Commodity Futures Trading Commission is suing Cash FX Group and three individuals over an alleged $950 million crypto-linked foreign-exchange scheme, Cointelegraph reports. The complaint was filed on Friday in the US District Court for the Middle District of Florida.
The defendants named in the action are Cash FX and its chief executive, Huascar Jose Lopez Castillo of Brazil, The Conversion Pros and its chief executive, Ronald Pope of Oregon, and Justin Halladay of Florida. The CFTC alleges they operated a multilevel marketing Ponzi scheme.
According to the agency, the defendants solicited and accepted more than $950 million for the purported purpose of trading retail foreign currency contracts in a commodity pool. They are accused of falsely telling participants that pool funds were handled by expert traders, proprietary algorithms and artificial intelligence, and of promising returns of up to 15% a week.
Regulator files Florida complaint
The CFTC alleges that Cash FX carried out minimal forex trading and misappropriated most of the participant funds. New contributions from participants were used to pay fictitious trading profits, the agency claims, while millions of dollars were directed to each defendant. Cash FX also provided false accounting statements to participants, who lost at least $406 million, according to the CFTC.
David I. Miller, the CFTC's director of enforcement, said the Division of Enforcement had continued to refocus on its core mission of protecting the public from fraud and manipulation. He described the action as critical and said it reflected a commitment to addressing fraud wherever it is found.
The case comes as the CFTC works on its approach to overseeing the digital asset sector. Cointelegraph reported on 18 September that the agency had submitted a new regulatory action covering crypto asset transactions and markets for White House review. Details of the planned regulations were not disclosed.
Alleged Ponzi-style pool
That submission followed the Senate's failure to advance the CLARITY Act, legislation intended to establish a federal regulatory framework for crypto markets. The Cash FX complaint is a civil enforcement matter, and the CFTC's allegations have not been proven in court.