CFTC orders crypto trader to pay over USD 1.1 mln for Bitcoin fraud

Tuesday 13 November 2018 10:39 CET | News

The Commodity Futures Trading Commission (CFTC) has accused Joseph Kim of a fraudulent Bitcoin and Litecoin scheme and required him to pay more than USD 1.1 million.

Joseph Kim admitted orchestrating the fraudulent scheme that led to more than USD 1 million in losses, of which Kim misappropriated more than USD 600,000. The CFTC Order found that between September 2017 and November 2017, Kim misappropriated Litecoin and Bitcoin from his employer, a Chicago-based proprietary trading company. He was able to misappropriate the company’s cryptocurrency through a series of transfers between the firm’s accounts and Kim’s own personal accounts.

When questioned about the missing Litecoin and Bitcoin, Kim falsely represented that there were security issues with a virtual currency exchange that necessitated transfers into various accounts. Kim was discovered by his employer in November 2017, after losing approximately USD 601,000 from Kim’s scheme.

Thereafter, the accused began fraudulently soliciting funds from individuals (customers) to continue trading in virtual currency with the hope of using trading profits to repay his employer. Between December 2017 and March 2018, Kim obtained approximately USD 545,000 from at least 5 customers to trade virtual currency.

Still, in soliciting the funds, Kim falsely told customers that he had decided to voluntarily leave his company to start his own trading company, and concealed from customers that he had been fired for misappropriating the firm’s virtual currency. Furthermore, he also falsely told customers that he would invest their funds in a low-risk virtual currency arbitrage strategy, when, in fact, he made high-risk, directional bets on the movement of virtual currencies that resulted in Kim losing all USD 545,000 of his customers’ funds.

Kim concealed those losses by sending false account statements to customers reflecting profitable trading.

In addition to requiring Kim to pay USD 1,146,000 in restitution to his company and customers, the Order imposes permanent trading and registration bans on Kim, including virtual currency trading and solicitation bans, and permanently enjoins him from further violations of the Commodity Exchange Act and CFTC Regulations, as charged.

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Keywords: Bitcoin, Litecoin, cryptocurrency, fraud, Bitcoin fraud, Commodity Futures Trading Commission, CFTC
Countries: World

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