Trader Faces Imprisonment and $1 Million Penalty Over Fraudulent Crypto Scheme

An Arizonian trader has recently been incarcerated and charged a penalty of $1 million by the U.S. Commodity Futures Trading Commission (CFTC) over running an illicit Bitcoin and Litecoin scheme.

According to a press release published November 9, the CFTC has issued an Order filing and settling charges against Joseph Kim, who pled guilty of defrauding hundreds of thousands of dollars from investors by embezzling over $600,000 of funds from his former employer.

As the CFTC detailed in the release, from September to November 2017, Kim siphoned off digital assets from a Chicago-based trading company to his personal accounts, thereby amassing a total of $601,000.

Upon questioning about the lost assets, Kim falsely claimed that a number of security issues with the trading company prompted him to transfer the tokens into other accounts. It was not until November that the firm discovered the fraudulent scheme which resulted in Kim’s dismissal.

However, after being fired from the firm, Kim went on soliciting funds from individual investors and continued trading digital assets in an effort to reimburse the amount owed to his former employer. As a result, at least five investors have been defrauded from December 2017 to March 2018, allowing Kim to amass over $545,000.

According to allegations, Kim managed to hoodwink these customers, claiming that he voluntarily resigned from the firm to launch his own startup, adding further that he would invest the customers’ funds in a low-risk arbitrage strategy when he actually put the digital assets into high-risk trades, resulting in the loss of all the customers’ funds.

As a result, the CFTC has banned Kim from all forms of trading and is now facing a 15-month imprisonment on top of a $1,146,000 penalty.

As CFTC director of enforcement James McDonald stated in the release:

“Today’s Order stands as yet another in the string of cases showing the CFTC’s commitment to actively police the virtual currency markets and protect the public interest.