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.

Image source: Shutterstock


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Did US Regulators Began Offensive Against Crypto Platforms? CFTC Fines Kraken

One of the biggest cryptocurrency exchanges, Kraken, received a $1.25M fine. The Commodity Futures Trading Commission imposed the “civil monetary penalty” plus a cease and desist from “further violations of the Commodity Exchange Act (CEA)” on September the 28th. According to the CFTC, Kraken provided margin for commodity transactions to retail clients in the U.S. who were not suitable to use those products.

Related Reading | How the CFTC fine on Coinbase could affect future crypto company listing

The fine, however, seems like a slap on the wrist for a gargantuan company like Kraken. They’re a private company and their annual revenue is not on the public domain, but they raised $100M at a $4B valuation in 2019. And, reportedly, Kraken was seeking a $20B valuation this year following an IPO that didn’t happen. For a company that size, a $1.25M fine is not much, but maybe the punishment just fits the violation.

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ETHUSD price chart for 09/29/2021 - TradingView

ETHUSD price chart for 09/29/2021 - TradingView

ETH price chart on Kraken | Source: ETH/USD on

What Did Kraken Do Exactly?

The violation occurred between June 2020 and July 2021 approximately. During that period, “Kraken illegally operated as an unregistered FCM.” And, what did the unregistered futures commission merchant offer? Well, U.S. customers could acquire digital assets using margin, and Kraken provided said asset or the fiat money “to pay the seller for the asset.” Of course,  users had to provide collateral and pay for the received asset within 28 days. 

If they didn’t pay in the established period, “Kraken could unilaterally force the margin position to be liquidated.” They could also liquidate “if the value of the collateral dipped below a certain threshold percentage of the total outstanding margin.” In short, Kraken was selling futures and extending credit without registering as an FCM.  “These transactions were unlawful because they were required to take place on a designated contract market and did not.”

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The CFTC’s Acting Director of Enforcement, Vincent McGonagle, said in the press release:

“This action is part of the CFTC’s broader effort to protect U.S. customers. Margined, leveraged or financed digital asset trading offered to retail U.S. customers must occur on properly registered and regulated exchanges in accordance with all applicable laws and regulations.”

The Cryptocurrency Exchange’s Latests Plays

Over the last few months, Kraken representatives went hard on the traditional financial system. From their Director Dan Held calling it “a cartel,” to CEO Jesse Powell predicting that cryptocurrency companies would replace them within a decade. In Held’s tweet, he attached a graphic that showed the consolidation of the US banking sector advanced through the years and now just four institutions control it all: 

Related Reading | Bitcoin Slides 5% From Recent Highs Amidst Binance CFTC Probe Revelation

For his part, the last day of March, Powell told Bloomberg:

“Most of these guys haven’t done the work these last ten years to make sure they are current with the crypto technology. So I think there’s a very real risk that over the next ten years, for those legacy businesses to be simply replaced.”

In more recent news, Kraken is trying to re-enter the European market. The company was licensed to operate through the UK’s Financial Conduct Authority. Thus, since Brexit happened, they have to find a new home for their license. When NewsBTC covered the news, we said:

“Powell added that the Kraken exchange seeks to re-enter Europe by the end of 202. It will go with the Republic of Ireland, Malta, and Luxembourg, among possible countries, to award such a license. However, they are yet to fix an official date as the talk still goes on.”

Will the $1.25M fine the CFTC imposed throw a wrench on those, or any plans? Certainly not. Not by a long shot. 

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