The U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement complaint on September 25 against Cash FX Group S.A. and its chief executive, Huascar Jose Lopez Castillo, accusing them of running a multilevel-marketing Ponzi scheme that took in more than $950 million for purported retail foreign exchange trading in a commodity pool. Filed in the U.S. District Court for the Middle District of Florida, the complaint also names The Conversion Pros, Inc. and its CEO Ronald Pope, and Florida promoter Justin Halladay.
How the scheme allegedly worked
The CFTC alleges Cash FX told participants their money would be traded by expert traders, proprietary algorithms and artificial intelligence, and promised returns of up to 15 percent a week. In reality, the agency says, the firm conducted minimal forex trading and misappropriated nearly all participant funds, using new contributions to pay fictitious profits to earlier participants while directing millions of dollars to each defendant. The complaint adds that Cash FX directed participants to send funds, described as bitcoin, to wallets on the blockchain, and that the firm issued false account statements to keep the appearance of large trading returns alive.
The scale of the alleged losses
Participants lost at least $406 million, the CFTC said. The complaint alleges Lopez controlled the wallets that received participant bitcoin, and that he routed funds to personal accounts, including one held at a major cryptocurrency exchange in the name of his wife or girlfriend. The enforcement action follows a broader U.S. crackdown on crypto-linked fraud, including FinCEN’s finding that $12.7 billion was tied to crypto scams run from Asian compounds.
What the CFTC is seeking
The CFTC is asking the court for restitution, disgorgement and civil monetary penalties, along with trading and registration bans and a permanent injunction. “The Division of Enforcement has continued to refocus on its core mission of protecting the public from fraud and manipulation,” said Director of Enforcement David I. Miller. “This critical action, and the massive fraud it targets, reflects our steadfast commitment to addressing fraud wherever we find it.” The complaint is the latest example of the agency’s stepped-up enforcement of commodity market rules under the Commodity Exchange Act.