The US Commodity Futures Trading Commission has filed a civil enforcement case against Cash FX Group and several associated individuals and companies, alleging they raised more than $950 million through a multilevel marketing investment scheme tied to retail foreign-exchange trading and cryptocurrency.
According to the complaint, the operation told participants their money would be traded in a commodity pool using expert traders, proprietary algorithms and artificial intelligence. The agency says those claims were false, that actual forex trading was minimal, and that participants were left with at least $406 million in losses.
Who the CFTC named in the lawsuit
The complaint was filed Friday in the US District Court for the Middle District of Florida. The CFTC named Cash FX Group; its chief executive, Huascar Jose Lopez Castillo of Brazil; The Conversion Pros; that company’s CEO, Ronald Pope of Oregon; and Justin Halladay of Florida as defendants.
The regulator describes the case as a foreign-exchange investment fraud that also involved cryptocurrency. Its central allegation is that the defendants solicited and accepted customer money for what was presented as retail forex trading inside a pooled investment vehicle.
How the alleged scheme was presented
In the CFTC’s account, Cash FX and the other defendants promoted the program through a multilevel marketing structure. Prospective participants were allegedly told that pooled funds would be managed by sophisticated trading systems and professionals, including proprietary algorithms and artificial intelligence.
The complaint also says investors were promised returns of as much as 15% per week. Those representations, the agency alleges, were used to attract a large volume of deposits into the program.
What the regulator says happened to customer funds
Rather than carrying out the promised trading activity, Cash FX allegedly conducted little real forex trading. The CFTC claims that most participant money was misappropriated instead of being used for the stated investment purpose.
The agency further alleges that newer deposits were used to pay supposed profits to earlier participants, a hallmark of a Ponzi-style operation. It also says millions of dollars were directed to each defendant and that participants received false account statements showing fictitious trading gains.
Losses alleged and what comes next
The CFTC says the scheme took in more than $950 million and left participants with at least $406 million in losses. Those figures are allegations from the regulator’s complaint and will be tested in court as the case proceeds.
Announcing the action, CFTC Division of Enforcement Director David I. Miller said the agency was focused on protecting the public from fraud and manipulation and described the lawsuit as part of that effort. The next confirmed step is the litigation in federal court, where the defendants will have an opportunity to respond to the allegations.
Source: cointelegraph.com