US gov’t can intervene in $7M BTC fraud case, New York judge rules

A judge in New York given the greenlight to the U.S. federal government to intervene in a high profile BTC fraud case, setting a new precedent for enforcement action around crypto scams. Presiding in the New York Southern District Court, Judge Loretta A. Preska ruled in favor of the U.S. government in the civil case against alleged BTC scammer Jon Barry Thompson, Finance Feeds reported.

The case relates to an alleged $7 million swindle, with the ruling giving the Commodity Futures Trading Commission (CFTC) the ability to intervene in the civil action, which is running alongside international criminal prosecutions in relation to the case.

Thompson has been charged with “knowingly or recklessly making false representations to customers in connection with the purported purchase of Bitcoins worth over $7 million,” with the CFTC initiating the civil action against Thompson back in September.

In her ruling, Preska said the government’s application to intervene in the case would be granted, allowing them to continue enforcement action against Jon Barry Thompson.

Upon the consent of all relevant parties, the Government’s application to intervene in the above entitled matter and to stay the matter in its entirety until the conclusion of the parallel criminal case, United States v. Jon Barry Thompson […] is granted.

According to the CFTC, Thompson is alleged to have remitted client funds to third parties without authorization, during his time overseeing a BTC escrow service. The funds were not returned to the clients involved, nor were they safeguarded by Thompson as promised, leading to a deluge of complaints to the CFTC.

As well as various penalties against Thompson, the regulator is also seeking injunctive relief against future violations of the Commodity Exchange Act and associated regulations.

The case against Thompson is only the latest enforcement action brought by a U.S. regulator against an alleged crypto scammer, with illegal activity still rife within the BTC community. Crucially, the ruling means the CFTC and other arms of government may be able to intervene in similar actions in future, allowing regulators to initiate or takeover civil proceedings against those alleged to have scammed investors through BTC.