CFTC’s Battle Against Crypto Scams Sees Intensified Clampdowns

The United States Commodity Futures Trading Commission (CFTC) has been busy tackling crypto scams this week.

On Thursday, the Justice Department revealed that New Yorker William Ichioka pleaded guilty to multiple fraud charges for running a crypto Ponzi scheme.

The same day, the CFTC announced that it had filed a lawsuit against Justby International Auctions. The civil action alleges that the company operated a romance scam that defrauded customers out of over $1.3 million USD.

Man Charged Over $21 Million Crypto Ponzi

The U.S. Attorney’s Office publicized the case against Ichioka for the Northern District of California. In a press release, the prosecutors describe how Ichioka Ventures convinced victims to invest millions of dollars based on false premises.

The Ponzi scheme attracted new investors by faking documents that purported the business was generating impressive returns trading crypto. 

Commenting on the case, a spokesperson from the U.S. Attorney’s Office referred to the often lucrative world of crypto trading. “The allure of using cryptocurrencies to make massive profits in a short timeframe provides fertile ground for fraudsters to take advantage of unwary victims,” said Abraham Simmons.

According to Simmons, Ichioka “convinced victims to invest millions of dollars into his phony venture by claiming he was making legitimate profits when, in fact, he was reporting fake results and creating bogus documents.”

The defendant has pleaded guilty to five counts of fraud and is set to appear in Federal court for sentencing. The CFTC said it seeks compensation for victims, a monetary penalty, and permanent trading bans.

CFTC Accuses California Business of Social Engineering Scam

In the second instance of the CFTC’s recent crackdown on crypto crime, California resident Cunwen Zhu and his company Justby International Auctions, are accused of defrauding at least 29 people out of over $1.3 million.

The CFTC’s complaint alleges Zhu and Justby operated a type of “romance scam,” also known as a “pig butchering” scheme. In these types of fraud, perpetrators manipulate victims by pretending to develop a friendly or romantic relationship.

In a statement, the Commission claims that Zhu told victims he was using their money to trade crypto. But far from trading on customers’ behalf, the charges allege that Zhu and his co-conspirators misappropriated the fund for themselves.

Just as Ichioka falsified documents to convince people he was making money, the CFTC alleges that Justby provided customers with fake trade records. Further still, the charges even claim that the company designed entire fake trading platforms to convince victims of its legitimacy.

Crypto Romance Scams on the Rise

Earlier this year, the FBI warned that romance scams were increasingly pressuring victims to invest in crypto.

The law enforcement agency said it anticipates reported losses from crypto investment romance scams to increase in 2023. Commenting on the trend, Sherri E. Onks, Special Agent in Charge of FBI Jacksonville, connected it to the growth of online dating.

“Whether you’re looking for love or a friendship online, be sure you first understand the risk of being exploited. Remember, a scammer will always eventually ask you for something, so set a boundary early on and never, ever send money to someone you’ve never met,” Onks remarked in a statement.

For its part, the CFTC has issued its own warning against digital asset romance scams. Like the FBI, the commission advises the public to avoid offers to trade cryptocurrencies solicited by people they meet through dating apps or social media.