Federal Court Orders Crypto Fraudster to pay more than $32M

Coinbase settles $6.5M CFTC fine for inaccurate reporting and wash trading
April 2, 2021
FINRA hits HSBC Securities with a $650K fine and censure
April 21, 2021

According to the Commodity Futures Trading Commission (CFTC), the U.S. District Court for the District of Nevada entered a default judgment against defendants for a cryptocurrency fraud and misappropriation scheme. Charged are David Gilbert Saffron, an Australian citizen, residing in Las Vegas, Nevada and/or Los Angeles, California, and his company, Circle Society, Corp., a Nevada corporation.

Last month, the court entered a final judgment requiring defendants Saffron and Circle Society, jointly and severally, to pay restitution of $14,841,280 to defrauded pool participants, disgorge $15,815,967, and pay a civil monetary penalty of $1,484,128.

The court’s final judgment also permanently enjoins the defendants from engaging in conduct:

  • violating the Commodity Exchange Act and CFTC regulations;
  • ever registering with the CFTC;
  • trading in any CFTC-regulated markets; and
  • trading in any commodity interest for himself or others.

What happened?

The complaint charges that from at least December 2017 to 2019, the defendants fraudulently solicited and accepted at least $11 million worth of bitcoin and U.S. dollars from individuals in the United States to trade off-exchange binary options on foreign currencies (forex) and cryptocurrency pairs.

According to the complaint, the defendants fraudulently solicited funds from at least 14 members of the public to participate in a pool operated by Circle Society, an entity Saffron created and used to perpetrate his fraud. Their strategy? To make false claims of Saffron’s trading expertise and guaranteeing rates of return up to 300%.

Of course, rather than using pool participants’ funds to trade in binary options contracts as promised, the defendants misappropriated funds. They retained participants’ funds in Saffron’s personal electronic cryptocurrency wallet and, in traditional Ponzi fashion, used the funds to pay other participants.

The defendants then lied to participants to conceal their misappropriation.

The court said the default judgment is warranted because the defendants consistently failed to offer any colorable defense to the CFTC’s claims. This is in addition to what the court called the defendants’ rehashed excuses for their continued failure to comply with the court’s orders throughout the litigation. Previously, the court had granted the CFTC’s motion for sanctions arising from the defendants’ contempt and awarded the CFTC attorneys’ fees and expenses.

Can compliance protect against “offers too good to refuse?

Of course not. PT Barnum was quoted as saying, “There’s a fool born every minute.” However, those aren’t your clients or your firm’s members. Because you work hard to ensure you have the right tools in place to keep your team on the straight and narrow, right?

That’s why so many compliance professionals like you and your team rely on the cloud-based compliance solutions Patrina delivers. For more than 25 years, Patrina has been helping compliance professionals like you stay on the “straight and narrow” efficiently and cost-effectively. So, let’s talk. Call 212-233-1155 to ask about Patrina’s cost-effective, designated third-party services, comprehensive, 8-module compliance solution, compliant data capture, file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered. Let’s talk.

 

Request A Demo
We will contact you shortly to arrange your demonstration.
We respect your privacy. Your information is safe and will never be shared.
Don't miss out. Subscribe today.
×
×
WordPress Popup Plugin