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Traders Involved in Bitcoin Fraud Scheme Hit With $400,000 in Penalties

(HedgeCo.Net) A Texas federal court ordered two defendants—one using the name Morgan Hunt (Hunt), purportedly of Arlington, Texas (Hunt), and the other using the name Kim Hecroft (Hecroft), purportedly of Baltimore, Maryland (together, Defendants)—to pay nearly $400,000 in civil monetary penalties and restitution in connection with a lawsuit alleging fraud brought by the Commodity Futures Trading Commission (CFTC).

In an Order and Default Judgment (Order) filed June 28, 2019, Judge Reed C. O’Connor of the U.S. District Court for the Northern District of Texas found that Hunt, doing business as Diamonds Trading Investment House, and Hecroft, doing business as First Options Trading, engaged in a fraudulent scheme to solicit Bitcoin from members of the public to invest in trading products including leveraged or margined foreign currency contracts (forex), binary options, and diamonds.

The Order found that between January 2017 and the filing of the CFTC Complaint on September 28, 2018 Defendants used Facebook and email to fraudulently solicit Bitcoin from members of the public, falsely claimed that they would use customer funds to invest in trading for the benefit of the customers, misrepresented their experience and track record as traders and portfolio managers, falsely told customers that they could not withdraw their purported investment profits without first paying a tax to the CFTC, and misappropriated customer funds. Defendants’ fraudulent actions included providing fake account statements, impersonating a CFTC investigator, and sending forged documents purportedly authored by the CFTC’s General Counsel and bearing the image of the CFTC’s official seal.

James McDonald, CFTC Director of Enforcement, commented: “As the CFTC has repeatedly warned, retail customers should exercise caution before buying or trading cryptocurrencies on unfamiliar Internet websites or social media. The CFTC reiterates that it does not collect taxes or fees, and will continue to educate the investing public and aggressively pursue misconduct in this arena.”

The Order requires Hunt to pay restitution and a $180,000 civil monetary penalty, and requires Hecroft to pay restitution and a $180,000 civil monetary penalty. In addition, the Order imposes permanent trading and registration bans on Defendants, and permanently enjoins them from further violations of the Commodity Exchange Act and CFTC Regulations, as charged.

The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

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