In a suit brought by the Commodity Futures Trading Commission (CFTC), Morgan Hunt and Kim Hecroft were ordered to pay nearly $400,000 after allegedly conducting a scheme to solicit Bitcoin from investors through fraudulent means.
Fraudsters Used Bitcoin to Run Scheme
Between January 2017 and September 2018, Hunt and Hecroft posed as experienced traders and used Facebook, emails, and forged CFTC documents to persuade investors into giving them Bitcoin. The defendants, conducting business through entities called Diamond Trading Investment and First Options Trading, promised to invest the Bitcoin into products such as diamonds, foreign currency contracts, and binary options.
The defendants furthered the scheme by providing fake account statements to clients and falsely stating that profits could only be withdrawn if the investors paid a 10% tax to the CFTC.
Court Rules Monetary Penalty and Restitution
A Texas Federal court ruled that Hunt and Hecroft committed fraud and ordered the men to pay a civil monetary penalty of $180,000 each. Hunt also was ordered to pay restitution in the amount of $3,941.35, while Hecroft was ordered to pay $32,047.79 in restitution as well. According to the announcement, the defendants may be unable to compensate victims due to insufficient funds.
CFTC Warns Investors About Risks
In a statement made by the CFTC's director of enforcement James McDonald, he warned investors to “exercise caution before buying or trading cryptocurrencies on unfamiliar internet websites or social media.” He also stated that “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.”
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