The U.S. Commodity Futures Trading Commission [CFTC] filed a civil enforcement action on the 26th of January against New York-based crypto trader Jeremy Spence alleging fraud for operating a Ponzi scheme involving digital assets such as Bitcoin and Ethereum.
CFTC Unveils Civil Fraud Charges
CFTC’s complaint alleged that Spence fraudulently solicited more than $5 million of investments from individuals in a cryptocurrency investment scheme. Acting Director of Enforcement Vincent McGonagle stated,
“Fraudulent schemes, like that alleged in this case, undermine the integrity and development of digital asset markets and cheat customers out of their hard-earned money. We will continue to work to protect participants in our markets from fraudulent practices and hold fraudsters accountable.”
The 24-year old cryptocurrency trader was arrested by the FBI in Rhode Island on Tuesday morning on charges of wire fraud as well as commodities fraud that have maximum sentences of up to 30 years combined.
According to prosecutors and the CFTC, Spence’s trading allegedly led to massive trading losses for his investors and his payouts of what was supposed to be the profits of the clients were, in fact, misappropriated funds of other customers.
The complaint also stated that Spence had previously reported false account balances to his investors in a bid to thwart redemptions. And in a classic Ponzi-like fashion, used money from new investors to pay back his earlier investors.
In addition, Spence allegedly engaged in numerous efforts to hide his misconduct, including misrepresenting his trading profitability and the number of assets he had under management, misappropriating customer funds, and issuing fictitious performance statements.
As per CFTC’s complaint, Spence admitted to his customers that he had been involved in ‘lies and deceit.’
Back in 2018, a Florida-based law firm called Silver Miller had filed a class-action lawsuit against Spence who was operating under the moniker ‘Coin Signals’.
Manhattan U.S. Attorney Audrey Strauss, in an official statement, alleged that Spence lured investors to his cryptocurrency investment scam by claiming returns of up to 148% which resulted in a $5 million void in his customer’s accounts. Strauss further added,
“Spence’s alleged conduct should strongly signal would-be investors to thoroughly educate themselves in the cryptocurrency ecosystem before falling prey to investment scams promising huge returns for small investments that are indeed too good to be true.”