In a significant move aimed at crypto industry, the US Commodity Futures Trading Commission (CFTC) has archived a civil enforcement action against Mosaic Exchange Limited, a Pennsylvania limited liability company, and its owner and CEO, Sean Michael.
The lawsuit alleges that the defendants operated a fraudulent operation digital asset of commodities, deceiving investors and misappropriating customer funds.
Alleged fraudulent crypto scheme
According to the complaint, the defendants fraudulently solicited and induced 17 individuals from the United States and other countries to invest hundreds of thousands of dollars in bitcoin (btc) and other funds.
These funds were supposed to be traded on behalf of clients in bitcoin and other crypto assets. However, the defendants allegedly misappropriated the client’s funds for their benefit.
The background of the case reveals that from approximately February 2019 to June 2021, the defendants made false representations about Mosaic Exchange. They claimed that Mosaic was a cryptocurrency trading platform with significant assets under management, offering a proprietary trading algorithm that boasted an 82% accuracy rate.
Additionally, they announced significant profit margins ranging from “20% to 60% per month” and “10% to 50+ per month.” The defendants also alleged partnerships or brokerage agreements with specific cryptocurrency trading exchanges.
However, as alleged in the complaint, these statements were fraudulent. Mosaic Exchange did not have the claimed assets under management nor did it have a track record of profitable operations as advertised.
According to the CFTC, Mosaic incurred losses by trading on behalf of its clients. Furthermore, the company did not have the partnerships or intermediation agreements that it had promoted. Consequently, several clients suffered a complete loss of their invested funds.
CFTC commissioner calls for stricter regulations
On this matter, Commissioner Kristin N. Johnson has issued a statement emphasizing the importance of “protecting investors from fraudulent activities” in the nascent crypto industry.
Commissioner Johnson highlights the inherent risks of crypto fraud and emphasizes the need to protect vulnerable investors. Johnson is referring to a blockchain analysis company, Chainalysis, which identified scams as the most common form of cryptocurrency-based crime.
The report estimated that fraud caused more than $5.9 billion in losses the previous year alone. Investment scams, in particular, were identified as the top scams, where scammers lure victims with promises of extraordinary returns.
Johnson highlights the case of Mosaic Exchange, which traded digital asset derivatives on platforms such as BitMEX and binanceplatforms that the CFTC has previously accused of regulatory violations.
In light of these developments, Commissioner Johnson believes that the CFTC should leverage its existing authority to introduce regulations that close any potential gaps in oversight within these evolving market structures.
As a result, the CFTC seeks various remedies through its litigation, including restitution, disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against future violations of the Commodity Exchange Act (CEA). ) and CFTC regulations.
Featured image from Shutterstock, chart from TradingView.com
