Utah Man Ordered to Settle Over $2.5 Million for Bitcoin Fraud by CFTC

The Commodity Futures Trading Commission (CFTC) has mandated Utah-based Jacob Orvidas to reimburse upwards of $2 million and incur a civil monetary penalty amounting to $500,000. The issued order, which settles simultaneously filed charges, unearthed Orvidas’ fraudulent enticement of at least four individuals to invest in a leveraged Bitcoin commodity pool.

According to the findings, between October 2017 and July 2020, Orvidas deceitfully invited pool participants for leveraged Bitcoin trading, making lofty promises of significant profits and assured monetary safety. In one such instance, he claimed a client transformed a $100,000 Bitcoin investment into a staggering $2.7 million. Such assurances, which were found to be baseless, led participants to pour over $2 million into his commodity pool. The proceedings unveil that Orvidas, failing in his trading commitments, nearly exhausted all funds. To veil these losses, he resorted to producing counterfeit spreadsheets, falsely showcasing trading profits and high account balances. Subsequently, participants were met with deceitful narratives when seeking their promised profits and principal amounts, leading to a collective loss surpassing $2 million.

The report also sheds light on Orvidas’ negligence to register as a commodity pool operator, which the CFTC considers a breach of the Commodity Exchange Act. Consequently, Orvidas faces a 10-year embargo from both registration and trading activities.

Ian McGinley, Director of Enforcement at the CFTC, commented, “This bitcoin case is a straight-up fraud: simple and old as time.” He further emphasized the CFTC’s unwavering commitment to safeguarding common folks from deceptive digital-asset endeavors.

The Securities and Exchange Commission (SEC) played a pivotal role in assisting the CFTC throughout this case. Spearheading the matter from the Division of Enforcement were Anthony Biagioli, Stephen Turley, Jeff Le Riche, Christopher Reed, and Charles Marvine.

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CFTC Charges Fundsz and Individuals for Fraudulent Cryptocurrency and Precious Metals Solicitation

The Commodity Futures Trading Commission (CFTC) has filed a complaint against Rene Larralde, Juan Pablo Valcarce, Brian Early, Alisha Ann Kingrey, and their unincorporated entity, Fundsz, in the U.S. District Court for the Middle District of Florida. The complaint, announced on August 2, 2023, charges the defendants with fraudulent solicitation from clients to purportedly trade in cryptocurrencies and precious metals.

According to the complaint, from approximately October 2020 to the present, the defendants solicited participants with claims that Fundsz has historically produced over 3% returns per week using a “proprietary algorithm” for trading cryptocurrencies and precious metals. They described this as their “secret sauce” and claimed that a one-time $2,500 contribution to Fundsz could grow to $1 million within 48 months with no additional deposits.

Furthermore, the defendants pitched Fundsz as if it had a charitable purpose, using the tagline “Fundsz For Your Cause” and falsely implying that contributing to Fundsz would support various humanitarian efforts. However, the complaint alleges that Fundsz does not trade customer funds at all, and any customer gains are illusory, as the defendants simply make up fictional weekly returns to report to customers.

The CFTC’s complaint was successful in obtaining an ex parte statutory restraining order, signed by U.S. District Court Judge Wendy Berger, which freezes the defendants’ assets, preserves records, and appoints a temporary receiver. A hearing on the CFTC’s motion for a preliminary injunction is scheduled for August 23, 2023.

As part of its ongoing legal actions, the CFTC is pursuing compensation for deceived investors, the return of unlawfully acquired profits, financial penalties, enduring bans on trading and registration, and a lasting order to prevent any more breaches of the Commodity Exchange Act (CEA).

Director of Enforcement, Ian McGinley, commented, “The CFTC remains steadfast in identifying and taking action against those who deceive clients in the realms of cryptocurrency and precious metals. Even if the offerings and tactics of these fraudsters evolve — as seen with their use of social media in this instance — the timeless wisdom that ‘when an offer seems too advantageous, it likely has a catch’ still holds true.”

In addition, the CFTC has disseminated guidance and resources, such as the Precious Metals Fraud Advisory, aiming to inform the public about the risks of fraud in precious metals trading and offering strategies to recognize, sidestep, and report potential deceit.

The public is encouraged to confirm a firm’s registration status with the CFTC prior to investing and to alert the Division of Enforcement about any dubious activities or potential breaches of trading regulations.

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Binance Trims Employee Benefits and Faces Regulatory Challenges Globally

According to a recent report by The Wall Street Journal, the global cryptocurrency exchange Binance has reduced several benefits for its employees, including reimbursements for mobile phone usage, fitness, and work-from-home expenses. 

The company cited the “current market environment and regulatory climate” as the reasons for this change, which has led to a decline in profit. This suggests that additional cost-cutting measures may be necessary in the future.

A representative for Binance indicated that the company might consider scaling back on certain products, business units, staff benefits, and policies in response to business and regulatory concerns.

In addition, Binance is reportedly planning to lay off between 1,500 and 3,000 employees by the end of the year, according to an anonymous source cited by CNBC. This information came to light around the company’s six-year anniversary on July 14, 2023.

Binance is currently facing legal challenges globally. In the United States, both the Securities and Exchange Commission and the Commodity Futures Trading Commission have initiated legal proceedings against the company.

The lawsuits allege that Binance and its CEO, Changpeng Zhao, offered unregistered securities. Binance has characterized these legal actions as an example of regulation by enforcement.

On July 5, 2023, the Australian Securities and Investments Commission (ASIC) conducted a search operation at the Binance Australia headquarters. This investigation into the now-closed local derivatives division of the crypto-giant is part of the operation, highlighting the increasing regulatory scrutiny Binance is facing.

This follows the decision to cease facilitating PayID AUD deposits by a third-party payment service provider on May 8, 2023.


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Digitex CEO Adam Todd Ordered to Pay $16 Million in CFTC Case

A federal court in the United States has mandated that Adam Todd, the CEO of the digital asset exchange Digitex, pay almost $16 million in disgorgement and penalties. The Commodity Futures Trading Commission (CFTC) filed a complaint against Digitex and Todd for suspected price manipulation and non-registration, which led to this decision.

The CFTC initially filed charges against Digitex and Todd in September 2022. The charges were related to the alleged manipulation of the price of the Digitex Futures native token, DGTX, and the failure of the company to register with the CFTC. Todd allegedly used a computerized bot to artificially inflate the price of DGTX. The bot was reportedly deployed on third-party exchanges in 2020 to buy more of the token than it sold.

The court’s ruling prohibits Todd and the four businesses he controls from trading in any CFTC-regulated markets: Digitex LLC, Digitex Limited, Digitex Software Limited, and Blockster Holdings Limited Corporation. In addition to the prohibition, the ruling mandates that Todd and his businesses pay a civil monetary penalty of $11,736,660 as well as $3,912,220 in disgorgement.

The CFTC’s enforcement action against Todd and Digitex Futures has now been resolved with this order. However, it’s important to note that the $16 million order or additional financial penalties may not necessarily result in repayment to Digitex users.

The regulatory scrutiny that cryptocurrency companies must endure is starkly shown by this example. It emphasises the need of abiding by legal requirements, such as those pertaining to registration and the outlawing of manipulative trading practises. 

In line with the SEC, the CFTC is taking action to ensure entities are lawfully registered and to address the manipulation of commodities.

On March 27, 2023, the CFTC filed a civil enforcement action against Changpeng Zhao, CEO of Binance, and three entities operating the Binance platform for numerous violations of the Commodity Exchange Act (CEA) and CFTC regulations. The complaint also implicates Samuel Lim, Binance’s former chief compliance officer, with aiding and abetting Binance’s violations. The CFTC seeks disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the CEA and CFTC regulations.


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Heath Tarbert Joins Circle as Chief Legal Officer and Head of Corporate Affairs

In an exciting development for the global fintech industry, Circle Internet Financial has appointed Heath Tarbert as its new chief legal officer and head of corporate affairs, effective from July 1, 2023. Tarbert’s appointment is a significant move for Circle, which has been actively pursuing a strategy of global growth.

Tarbert steps into the shoes of Flavia Naves, Circle’s outgoing general counsel, who had announced her plans to leave the company earlier this year. Naves is known for successfully overseeing the company’s expansion and fundraising efforts, as well as establishing a world-class legal organization.

Before accepting the role at Circle, Tarbert held a significant position as the chief legal officer at Citadel Securities. His impressive career spans leadership roles across all three branches of the federal government and several key regulatory bodies. His experience includes serving as the 14th chairman and chief executive of the Commodity Futures Trading Commission (CFTC), vice chairman of the International Organization of Securities Commissions, and assistant secretary of the U.S. Treasury for international markets.

The decision to bring Tarbert onboard underscores Circle’s commitment to integrating traditional finance with Web3, the decentralized web powered by blockchain technology. Circle’s co-founder and CEO, Jeremy Allaire, lauded Tarbert’s appointment, emphasizing that his vast legal expertise and global regulatory experience would be invaluable as the company seeks to enhance the utility value of its stablecoin, USDC, on a global scale.

On his part, Tarbert expressed his excitement to join Circle and contribute to its mission of evolving the global financial system. He stressed the need for sound regulatory rules that provide clarity and protection for individuals and businesses dealing with digital assets.

Circle Internet Financial is a global fintech firm offering businesses the ability to leverage digital currencies and public blockchains for various financial applications. It is well-known as the issuer of USDC and Euro Coin, trusted and interoperable money protocols used across the internet.


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CFTC Chairman Rostin Behnam Urges Congress for Regulatory Action on Digital Commodity Markets

Rostin Behnam, the Chairman of the Commodity Futures Trading Commission (CFTC), recently urged the U.S. House Committee on Agriculture to take legislative action to regulate the digital commodity market. Testifying at the Committee’s “Future of Digital Assets” hearing, he expressed the need to protect customers and ensure market resilience and stability in the face of growing volatility.

This call follows the Financial Stability Oversight Council’s landmark report last year, which highlighted financial stability risks associated with the digital asset market. The council recommended Congressional action to fill the regulatory gap, particularly over the spot market for digital assets that are not securities.

Behnam highlighted the pressing nature of these recommendations in the wake of events such as the bankruptcy of multiple digital asset platforms and alleged manipulative trading practices that undermined market confidence. He also drew attention to recurrent cybersecurity vulnerabilities that led to billions in lost funds.

Referencing the 2008 financial crisis, Behnam proposed that similar principles of market regulation – transparency, reporting, and registration – be applied to the digital commodity market. He stressed the need for rules focused on customer asset protection, trading activity surveillance, and the enforcement of stringent cybersecurity standards.

The chairman listed several key regulatory provisions, including robust customer protections, market integrity assurance, and adequate funding for regulation enforcement. He also highlighted the unique role of the CFTC in this process, emphasizing that it should be fully empowered to require necessary risk and operational disclosures from registered entities.

Behnam underscored that the new legislation must not undermine existing laws, particularly where securities laws apply. He further stressed that the CFTC’s authority in the spot market for digital commodities is presently limited to acting only after fraud has occurred, suggesting that it should be empowered to proactively establish rules to prevent fraud.

Finally, Behnam noted the CFTC’s unique funding structure, being the only financial market regulator that relies on Congress for funding. He urged Congress to provide the necessary resources for any new authority, as managing the digital commodity market within the current regulatory framework and resources would be challenging.

Behnam concluded his testimony by expressing optimism in the Committee’s efforts to address gaps in digital asset regulation and committed to working alongside the Committee and Congress members on the legislative proposal.


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CFTC Commissioner Calls for Reduced Cryptocurrency Anonymity

Christy Goldsmith Romero, a commissioner of the US Commodity Futures Trading Commission (CFTC), has called for reduced anonymity for cryptocurrencies. Speaking at the City Week 2023 conference in London on April 25, Romero emphasized the need to manage the risks associated with digital assets. She believes that anonymity is the primary feature that makes cryptocurrencies appealing to illicit finance and that this issue must be addressed by both governments and the industry.

In her keynote speech on Illicit Finance and Other Key Risks of Digital Finance, Romero stated that the risks associated with digital assets must be managed. She stressed that market integrity, national security, and financial stability are crucial and cannot be compromised. Romero’s proposal for reducing anonymity in cryptocurrencies could help to address these risks.

Cryptocurrencies are often used by criminals to evade detection and launder money. With the anonymous nature of transactions, it is difficult to trace the movement of funds and identify the parties involved. By reducing anonymity, it would become easier for law enforcement agencies to track down criminals who use cryptocurrencies for illegal activities.

Romero’s proposal may also help to address concerns around the regulation of cryptocurrencies. With greater transparency and traceability, governments and regulatory bodies would have greater visibility into cryptocurrency transactions, which could help them to identify potential risks and take appropriate action.

The issue of anonymity in cryptocurrencies has been a topic of debate for several years. Some argue that anonymity is an essential feature of cryptocurrencies and that reducing it would compromise privacy and security. However, others argue that anonymity enables criminal activities and that reducing it would make cryptocurrencies more legitimate in the eyes of the public and regulators.

Despite the debate, there have been several initiatives to reduce anonymity in cryptocurrencies. For example, the Financial Action Task Force (FATF) has introduced guidelines for virtual asset service providers (VASPs) that require them to implement measures to identify and verify their customers. Similarly, several countries have introduced Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations for cryptocurrency exchanges and other service providers.

In conclusion, Romero’s proposal for reduced anonymity in cryptocurrencies could help to address the risks associated with digital assets. However, it remains to be seen whether the industry will adopt such measures and whether they will be effective in managing the risks of cryptocurrencies. The debate around anonymity in cryptocurrencies is likely to continue, as governments and industry stakeholders grapple with the challenges posed by digital assets.


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Trading firms identified as Binance VIP clients in CFTC lawsuit

Binance, one of the world’s largest cryptocurrency exchanges, is facing a lawsuit filed by the United States Commodities Futures Trading Commission (CFTC) for allegedly violating US law by allowing US clients to trade on its platform without complying with Know Your Customer (KYC) standards. In the lawsuit, the CFTC identified three trading firms – Jane Street Group, Tower Research Capital, and Radix Trading – as Binance’s VIP clients, who allegedly received preferential treatment from the exchange.

According to Bloomberg, which cited “people familiar with the matter,” Radix Trading was identified as “Trading Firm A” in the CFTC’s suit, while Jane Street was “Trading Firm B” and Tower Research was “Trading Firm C.” The firms on the CFTC’s list were examples of US clients allegedly able to access Binance, despite not complying with KYC standards.

The alleged “VIP” treatment from Binance included lower transaction fees and faster trading services, according to the CFTC’s filing. The firms provided Binance with liquidity on the exchange, and Binance gained the corresponding trading fee revenues. This was part of a strategy that “actively facilitated violations of US law” by helping US trading firms evade KYC compliance standards, among other things, the CFTC alleged.

In a report by The Wall Street Journal, Radix Trading’s co-founder Benjamin Blander stated that he believed the firm acted legally even when trading with Binance’s offshore entity. He also claimed that Binance enabled Radix to sidestep compliance controls by providing them information on accessing Binance.com through a virtual private network to obscure its IP address.

The CFTC claimed that Binance prioritized “commercial success over compliance with US law,” enabling US trading firms to violate US regulations. However, Binance’s CEO Changpeng “CZ” Zhao vehemently denied the allegations of compliance and market manipulation violations in a follow-up post on March 28.

Binance has faced several regulatory challenges in recent months, including regulatory warnings and investigations from countries such as Japan, the UK, and Canada. The exchange has also been banned in countries such as China and India. Despite these challenges, Binance remains one of the world’s largest cryptocurrency exchanges, with a daily trading volume of over $40 billion.


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Binance faces investor backlash and Bitcoin withdrawals following CFTC lawsuit

The United States Commodity Futures Trading Commission (CFTC) recently filed a lawsuit against Binance, one of the world’s largest cryptocurrency exchanges, and its CEO, Changpeng “CZ” Zhao, for alleged regulatory violations. In response to the allegations, CZ denied any market manipulation by Binance, but investors were quick to respond with a significant move of assets away from the exchange.

Within 24 hours of the lawsuit announcement, investors withdrew over 3,400 BTC from Binance, anticipating market fluctuations and seeking to lessen the potential impact of a Binance shutdown. The move by investors led to a reduction in Binance’s total Bitcoin balance, which was reduced by over 3,900 BTC in the past week. In contrast, competing exchanges such as Coinbase, Bitfinex, and Gemini saw an increase in BTC reserves during the same 24-hour timeframe.

While CZ maintains that Binance does not trade for profit or manipulate the market, recent episodes involving other crypto entrepreneurs, such as FTX’s Sam Bankman-Fried and Terraform Labs’ Do Kwon, have shaken investor confidence in the cryptocurrency ecosystem.

It is also worth noting that Bitcoin balances on major crypto exchanges have declined since March 20, with nearly 27,000 BTC leaving these exchanges over the past week. The reasons behind this trend are not entirely clear, but it may be due to a combination of factors, including increasing regulatory scrutiny and concerns about the overall cryptocurrency market.

Alongside the CFTC’s lawsuit against Binance and CZ, a federal judge temporarily halted a proposed deal between Voyager and Binance.US. This move indicates that regulators are taking a closer look at the cryptocurrency industry and may be ramping up their efforts to enforce existing regulations and prevent fraudulent activities.

Overall, the recent events surrounding Binance and the wider cryptocurrency market have raised concerns among investors and regulators alike. While the long-term impact of these developments remains to be seen, it is clear that the cryptocurrency industry is facing increased scrutiny and may need to adapt to evolving regulatory requirements to continue its growth and development.


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Binance Crypto Withdrawals Spike Before CFTC Accusations

On March 27th, the United States Commodity Futures Trading Commission (CFTC) filed a suit against Binance, accusing the crypto exchange of regulatory violations. The accusation, however, did not come without warning. Shortly before the indictment was made public, almost a billion dollars worth of cryptocurrency was reportedly withdrawn from Binance’s wallets. According to data from Thanefield Capital, the withdrawals were substantial and occurred within hours of the announcement.

In the 12 hours leading up to the indictment, a total of almost $1.5 billion was withdrawn from platforms such as Binance, Kraken, Coinbase, and Bitfinex. Of that amount, more than half, or $850 million, was withdrawn from Binance alone. One hour after the announcement, Binance saw an additional $240 million withdrawn. According to data from Nansen, in the past 24 hours, more than $400 million in Ethereum-based funds were withdrawn.

Despite the withdrawals, Binance still holds an impressive $63.36 billion worth of cryptocurrency assets. These assets include over $2 billion worth of Tether (USDT), $17 billion worth of Bitcoin (BTC), and $8.1 billion worth of Ether (ETH).

The CFTC’s accusations against Binance and its CEO Changpeng Zhao include failing to meet regulatory obligations by not properly registering with the derivatives regulator. The CFTC alleges that Binance conducted transactions in Bitcoin, Ether, and Litecoin for U.S. citizens since at least 2019. This investigation by the CFTC is not the only regulatory scrutiny that Binance has faced in recent times.

Binance has also been investigated by the Internal Revenue Service and federal prosecutors over its adherence to Anti-Money Laundering rules. Additionally, the Securities and Exchange Commission conducted its own inquiry into whether Binance allowed U.S. traders to access unregistered securities.

In response to the CFTC’s allegations, Binance’s CEO, Changpeng Zhao, has denied any wrongdoing. He argues that Binance “does not trade for profit or ‘manipulate’ the market under any circumstances.” Despite the denial, the regulatory scrutiny and the recent withdrawals may lead to a tumultuous time ahead for Binance and the wider cryptocurrency market.


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Bitcoin (BTC) $ 26,627.13 1.52%
Ethereum (ETH) $ 1,594.60 1.77%
Litecoin (LTC) $ 65.10 0.31%
Bitcoin Cash (BCH) $ 209.74 2.14%