ِA Texas federal court has granted the US Commodity Futures Trading Commission’s motion for a default judgment against two defendants, identified as Morgan Hunt and Kim Hecroft, who solicited money by representing the agency in order to extract bitcoin from investors.
The detailed complaint shows that the suspects not only impersonated CFTC investigators, but also operated a fraudulent brokerage business to induce clients to send their bitcoins to participate in binary options and FX trading pools.
The fraud scheme has been going on since at least January 2017 until the CFTC uncovered the illicit enterprises in September 2018.
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Morgan Hunt, a Texas resident, had managed Diamond Trading Investment House while Kim Hecroft was doing business as First Options Trading. They reached out to their victims using Facebook and emails while promising to invest in margined forex contracts for the clients’ benefits. The court papers further allege that the fraudsters forged the CFTC’s documents to convince their victims to pay crypto-related taxes.
$400,000 million in penalties
Also contained in the complaints filed before the court for the Northern District of Texas was that the defendants distributed false account statements to fund participants, telling investors that they made steady gains from trading forex, binary options, and diamonds.
The CFTC has asked the court to provide full restitution to defrauded pool participants, disgorgement of ill-gotten gains and to pay the appropriate civil monetary penalties. In addition to fiscal claims, the agency seeks permanent registration and trading bans and a permanent injunction from future violations of federal commodities laws. The CFTC added that Morgan Hunt and Kim Hecroft had been ordered to pay nearly $400,000 million in penalties.
Commenting on the trend of crypto-related frauds, CFTC director of enforcement James McDonald said: “As the CFTC has repeatedly warned, retail customers should exercise caution before buying or trading cryptocurrencies on unfamiliar Internet websites or social media. 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.”