Colorado resident charged with fraud over crypto Ponzi scheme

Financial regulators in the U.S. continue their cleanup of the cryptocurrency space, this time with charges of fraud being brought against a resident of Colorado. The Commodity and Futures Trading Commission (CFTC) has filed its case against Breonna Clark and her Venture Capital Investments Ltd. (VCI), asserting that Clark was only interested in running a Ponzi scheme. It worked for a while, too, as the fraudster managed to steal more than $500,000 from unsuspecting investors.

According to a statement posted on the CFTC’s website, Clark, who also used aliases Eliot Clark and Alexander Pak, had “solicited U.S. residents to trade foreign currency (forex) contracts as well as Bitcoin and other digital assets through a commodity pool operated by the defendants. In connection with these solicitations, the defendants collected $534,829 from approximately seventy-two individuals. Rather than trade, the defendants used at least $418,000 of the funds for personal expenses—including acquiring a BMW automobile—and to make Ponzi-type payments to other pool participants.”

VCI also failed to register with the CFTC as required, and fraudulently sought participants by lying about the company’s market position and investment track record. Potential investors were given false account histories showing trading returns that didn’t exist, and provided false information about executives’ experience and expertise in trading.

The CFTC asserts in its legal filing (in pdf), “At various times during the Relevant Period, several pool participants requested to withdraw funds from their accounts. In some instances, Clark failed to respond at all to a pool participant’s request. In other instances, Clark responded with false excuses. Among the false excuses Clark made to pool participants why Defendants could not comply was that the CFTC was conducting an ‘audit.’ Clark has not returned funds to a number of pool participants despite their requests for withdrawal.” The commission indicates that it, at no time, had been conducting an audit of the company.

The Ponzi scheme was reportedly conducted from March 1, 2018 through June 30 of last year, perhaps longer. As a result of the fraud, the CFTC is seeking restitution for the investors, disgorgement of all gains, civil monetary fines, a permanent ban on registration and trading and a permanent injunction against “future violations of the Commodity Exchange Act.”

The regulator adds in its statement, “The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Foreign Currency (Forex) Trading Fraud Advisory, to help customers identify these scams.

“The CFTC also strongly urges the public to verify a company’s registration with the Commission before committing funds. If unregistered, a customer should be wary of providing funds to that entity. A company’s registration status can be found using NFA BASIC.”