CFTC Orders Virtual Currency Trader to pay over $1.1 Million for Bitcoin and Litecoin Scheme

Joseph Kim, Former Bitcoin and Litecoin Trader, Charged by CFTC

The CFTC has ordered a trader to pay a large fine for orchestrating an illegal Bitcoin and Litecoin scheme. As a consequence of an order filed by the Commission, they have settled charges against Mr. Joseph Kim, a Phoenix, Arizona resident. Mr. Kim has been penalized for a fraudulent scheme using Bitcoin and Litecoin, facing fines of over $1.1 million for his actions.

Mr. Kim did confess to defrauding investors, which led to more than $1 million. It is believed that Mr. Kim chose to misappropriate more than $600,000 of the funds. He violated the Commodity Exchange Act and the CFTC Regulations. In addition, the virtual currency trader was also sentenced to 15 months in jail for criminal charges that were submitted in the United States District Court for the Northern District of Illinois.

In this case, Mr. Kim was found to have dishonestly stolen Litecoin and Bitcoin from a proprietary trading firm that was based in Chicago and that was his employer. He was able to do this through transferring Litecoin and Bitcoin from the company’s accounts to his own personal accounts. This took place between September 2017 and November 2017. The company did question Mr.. Kim about the Litecoin and Bitcoin that went missing. However, Mr.. Jim claimed that this happens because there were security problems with the crypto exchange and this meant that transfers were made into other accounts. Of course, this was a false representation. When the company discovered that Mr.. Kim had a fraudulent scheme using Bitcoin and Litecoin in November 2017, he was fired and they suffered a loss of $601,000.

Mr. Kim was also found to have begun soliciting funds from customers and this was conducted from around December 2017 to March 2018. This fraudulent scheme was to raise trading profits that could be used to pay back the company. Mr. Kim scammed at least five customers and obtained around $545,000, withholding the fact that he had been fired for misappropriating Bitcoin and Litecoin. They believed that he had left to start a trading company of his own and the funds would be used in a low-risk virtual currency arbitrage strategy. However, this was not true and he lost all of the $545,000 on virtual currency bets.

The Commodity Futures Trading Commission’s Director of Enforcement, James McDonald, stated that this order as one of many cases that the Commission is policing the virtual currency market,

“Today’s Order stands as yet another in the string of cases showing the CFTC’s commitment to actively police the virtual currency markets and protect the public interest.  In addition, the criminal indictment and sentence reaffirms the CFTC’s commitment to working in parallel with our partners at the Department of Justice to root out misconduct in these markets.  My thanks to U.S. Attorney Lausch and his staff, as well as the Federal Bureau of Investigation, for their assistance in this case.”  

The criminal charges and sentencing also confirms that the Commodity Futures Trading Commission are committed to working with the Department of Justice to make sure that there are no criminal activities and misconduct in the virtual currency market

It was found that Mr. Kim was required to pay back $1,146,000.00 in restitution for his actions to the company and the customers that suffered from the Bitcoin and Litecoin scheme. In addition to this financial penalty, Mr. Kim will also have a permanent trading and registration ban to stop him from doing this again. In addition, this includes bans on virtual currency trading and solicitation.


The full order can be found here.

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