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Bitcoin Solicitation Fraud: $400,000 In Penalties Ordered

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A Texas federal court ordered two defendants to pay nearly $400,000 in civil monetary penalties and restitution related to a lawsuit alleging fraud brought by the Commodity Futures Trading Commission (CFTC).

The defendants were charged of attempting to steal Bitcoin through fraudulent solicitation, impersonation of a CFTC investigator, and forging CFTC documents.

In late September, the CFTC had filed a complaint in the U.S. District Court for the Northern District of Texas against Arlington, Texas-based Morgan Hunt of Diamonds Trading Investment House and Baltimore, Maryland-based Kim Hecroft of First Options Trading.

The court found that Hunt and Hecroft engaged in a fraudulent scheme to solicit Bitcoin from members of the public to invest in trading products. These included leveraged or margined foreign currency contracts, binary options, and diamonds.

Apart from making false or misleading representations or omissions using Facebook and email, the two also forged account statements, impersonated a CFTC investigator, and even forged documents purportedly authored by the CFTC's General Counsel and bearing the image of the CFTC's official Seal as part of their fraudulent scheme.

Additionally, the two falsely impressed retail investors that they were required to pay a "tax obligation" to the CFTC if they wished to withdraw funds from their Bitcoin accounts. They allegedly induced the customers to transfer money in the form of Bitcoin to their personal accounts under the pretense of paying a tax to the CFTC.

The order requires Hunt and Hecroft to each pay restitution and a $180,000 civil monetary penalty. The order also imposes permanent trading and registration bans on defendants, and permanently enjoins them from further violations of the Commodity Exchange Act and CFTC Regulations, as charged.

In October 2018, CFTC, that regulates futures and option markets, announced a ruling by the Federal Court that virtual currencies are commodities. The ruling also stated that the government agency has the power to prosecute cryptocurrency-related fraud.

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