The US Commodity Futures Trading Commission (CFTC) recently announced a civil enforcement against a cryptocurrency trading platform called Mosaic Exchange Limited and its owner, Sean Michael. According to a press release dated September 27th, the CFTC alleged that the Pennsylvania-based entity and its founder ran a scam involving digital assets. It was not until February 2021 that the agency became aware of their actions, which began in June 2019.
The CFTC stated that the cryptocurrency trade advertised itself as having Bitcoin Assets under Management (AUM) in the tens and millions of dollars. Under this disguise, the company fraudulently acquired hundreds of millions of dollars of Bitcoin from 17 US citizens and other nationals, and traded the cryptomarket on their behalf. Contrary to the claims of the company, the funds received were misappropriated.
The CFTC provided further details, saying that the fraudulent crypto operation promised its victims that they would make monthly returns between 20% and 60% using a proprietary trading algorithm. The company also falsely claimed broker agreements and partnerships with unknown Bitcoin exchange giants.
The US agency’s investigation revealed that the operation was not legitimate and it never held the AUM of millions of dollars claimed. Additionally, the government agency determined that there were no broker agreements between the crypto exchange and other crypto entities.
CFTC Commissioner Kristin N. Johnson labelled the entire Mosaic Exchange a “virtual house of cards”. Johnson expressed concern over the growing number of investment frauds in the nascent sector, saying “the need for greater investor protection becomes more apparent every day”.
Investment scams remain the most popular method used by fraudsters, according to a Chainalysis report. However, the report also showed that these scams had decreased by 77% this year, due to increased investor awareness and the exit of two popular investment scam operations.
Ransomware continues to be a persistent danger. A report revealed that criminals had earned $175.8 million in the same period of 2020, emphasizing the need for more effective measures to protect crypto wallets. To this end, the US Department of Treasury recently imposed sanctions on three over-the-counter (OTC) cryptocurrency traders for providing substantial support to the notorious North Korean Lazarus Group. The indictment stated that the individuals had helped the cybercriminal group convert millions of dollars of cryptocurrency into fiat currency.