The mastermind behind a massive bitcoin Ponzi scheme, Benjamin Reynolds, must pay the US Commodity Futures Trading Commission a whopping $572 million in penalty and restitution after a federal judge in New York entered a default judgment against him. The US CFTC accused Reynolds of running a Ponzi scheme called Control-Finance, which was fraudulently promoted as a UK-based cryptocurrency investment company.
The fictional CEO had allegedly misappropriated $1.24 billion in bitcoin.
In a complaint filed in 2019, the CFTC had companied that the fictional CEO obtained and misappropriated more than 22,800 bitcoin (worth more than $1.24 billion) from more than 1,000 customers. In order to extract bitcoin from investors, Control-Finance lured them with promises of guaranteed 1.5 percent a day, or 45 percent a month, which they described in weekly fabricated trade reports. The fraudulent scheme, Control-Finance, operated between May and September 2017, advertising profits from a trading pool that never actually generated any returns. Participants were guaranteed annual returns while they were actually duped into a Ponzi scheme.
“Control-Finance did no trading and made no profits for customers.”
The watchdog said Reynolds’ Control-Finance, in reality, did no trading and made no profits for customers. Instead, they laundered the stolen funds through thousands of circuitous blockchain transactions. In the course of his scheme, the defendant also transferred part of the stolen assets to bank accounts in offshore tax havens like the Seychelles islands. The court papers further allege that the Ponzi-scheme founder forged the UK Companies House documents to convince their victims to they were operating a regulated business. In 2017, the Ponzi scheme shut down its social media pages, but the CFTC has failed to locate Reynolds since it uncovered the illicit enterprises in June 2019. As such, the agency asked the New York court to settle the case in his absence.