The Commodity Futures Trading Commission (CFTC) has announced that the U.S. District Court for the Southern District of New York entered a default judgment against Benjamin Reynolds, of Manchester, England. According to the judgment, Reynolds operated a fraudulent scheme to solicit Bitcoin from members of the public and misappropriated customers’ Bitcoin. Reynolds has been ordered to pay almost $143 million in restitution as well as a civil penalty of $429 million totaling $571 million. An enforcement action against Reynolds was revealed in 2019.
The CFTC explains that between May 2017 and October 2017, Reynolds used a public website, various social media accounts, and email communications to solicit at least 22,190.542 Bitcoin, valued at approximately $143 million at the time, from more than 1,000 customers worldwide. Impacted individuals included at least 169 individuals residing in the U.S.
Reynolds is said to have falsely represented to customers that Control-Finance traded their Bitcoin deposits in virtual currency markets and employed specialized virtual currency traders that guaranteed trading profits for all customers. Reynolds apparently constructed an affiliate marketing network that relied on fraudulently promising to pay outsized referral profits, rewards, and bonuses to encourage customers to refer new customers to Control-Finance in a pyramid scheme.
The CFTC states that Reynolds made no trades on customers’ behalf, earned no trading profits for them, and paid them no referral rewards or bonuses. Customers were said to have lost most or all of their Bitcoin deposits as a result of the fraudulent scheme.