CFTC wins $900K lawsuit against digital currency Ponzi scheme

A federal court has ruled against a cryptocurrency Ponzi scheme and its founder in a lawsuit filed by the Commodity Futures Trading Commission (CFTC). The scheme, known as Venture Capital Investments LLC (VCI), will have to pay $900,000 in restitution and penalties.

The CFTC announced in a press release that the District Court of Colorado had entered a judgment against VCI and its founder, Breonna Clark. In its ruling, the court found Clark guilty of “fraudulently soliciting and misappropriating funds from clients in a digital asset and forex Ponzi scheme.”

Clark, who also went by Alexander Pak to her clients, will have to pay $450,302 in restitution to the clients she defrauded. The court also ordered her to pay 450,302 as a civil monetary penalty. She will also have to cater for all the costs the CFTC incurred over the course of the trial.

“Additionally, the defendants are now permanently enjoined from engaging in conduct that violates the Commodity Exchange Act (CEA) and CFTC regulations, as well as banned from registering with the CFTC and trading in any CFTC-regulated markets.”

As CoinGeek reported, the CFTC brought charges against Clark in February, alleging that the Colorado resident lured 72 people to invest $534,829 in her company. She claimed to offer digital currency and forex investment services. However, she only used the money on personal expenses, including buying a BMW. She also used some of the money to make payments to her investors in a Ponzi-style operation.

The CFTC also accused Clark of misleading prospective clients about her expertise, experience and investment track record, and using this to promise profitability to the clients. Whenever the clients would request for account statements to monitor their investments, she sent them false statements that showed profitability. In addition, Clark failed to register VCI with the CFTC pursuant to prevailing regulations.

The CFTC has tightened its grip on the digital currency industry in the U.S., cracking down on scams and issuing regulations to guide market participants. In October 2020, it issued a new advisory to futures commission merchants on holding of digital assets in segregated accounts.

See also: CoinGeek Live panel on Regulation of Digital Assets & Digital Asset Businesses