Thursday, October 29, 2020

Nevada Company and its Owner charged in $11 Million Cryptocurrency Fraud

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The U.S. Commodity Futures Trading Commission announced the filing of a civil enforcement action in the U.S. District Court for the District of Nevada, charging David Gilbert Saffron of Las Vegas, Nevada and Circle Society, Corp., a Nevada corporation, with fraudulent solicitation, misappropriation, and registration violations relating to an $11 million binary options scheme Saffron operated through Circle Society.  The complaint was filed on Monday, September 30, 2019.

On October 3, 2019, the court issued an ex parte order freezing assets controlled by the defendants and preserving records.  The court extended the restraining order on October 11, 2019.  A hearing on the Commission’s Motion for Preliminary Injunction is scheduled for October 29, 2019.

“Digital assets and other 21st century commodities hold great promise for our economy,” said CFTC Chairman Heath P. Tarbert. “Fraudulent schemes, like that alleged in this case, not only cheat innocent people out of their hard-earned money, but they threaten to undermine the responsible development of these new and innovative markets.  America must be a leader in this space, and we will only succeed if these markets have integrity.”

The complaint charges that from at least December 2017 to the present, the defendants fraudulently solicited and accepted at least $11 million worth of bitcoin and U.S. dollars from individuals in the United States to trade off-exchange binary options on foreign currencies (“forex”) and cryptocurrency pairs, among other things.

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According to the complaint, the defendants fraudulently solicited funds from at least fourteen members of the public to participate in a pool operated by Circle Society, an entity Saffron created and used to perpetrate his fraud, by making false claims of Saffron’s trading expertise and guaranteeing rates of return up to 300%.

Rather than using pool participants’ funds to trade in binary options contracts as promised, the defendants misappropriated funds, including by retaining participants’ funds in Saffron’s personal electronic cryptocurrency wallet and by using funds to pay other participants, in the manner of a Ponzi scheme.  The defendants then lied to participants in order to conceal their misappropriation.

In its continuing litigation, the CFTC seeks full restitution to defrauded investors, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against future violations of the Commodity Exchange Act and Commission regulations.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost, because the wrongdoers may not have sufficient funds or assets.

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The CFTC appreciates the assistance of the U.S. Attorney’s Office for the District of Nevada, the North Carolina Secretary of State’s Securities Division, and the Federal Bureau of Investigation’s Los Angeles Field Office.

The Division of Enforcement staff members responsible for this case are Danielle Karst, Timothy J. Mulreany, George H. Malas, Hillary Van Tassel, and Paul G. Hayeck.

Source: CFTC

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