A cryptocurrency platform has been mandated to pay approximately $2.5 million following its failure to respond to a lawsuit from the U.S. Commodity Futures Trading Commission (CFTC) which accused it of operating as a romance scam.
On March 13, a federal judge in Arizona approved the CFTC’s motion for summary judgment, instructing the platform to reimburse around $2.26 million that it illicitly obtained from its consumers, along with an additional civil penalty of nearly $221,500.
The judge noted that there was no indication that the platform’s lack of response to the CFTC was due to “excusable neglect.”
The lawsuit, filed in January 2024, alleged that the platform’s staff engaged in a “pig butchering” scheme, building romantic connections with users on social media to gain their trust and persuade them to invest.
According to the CFTC, five victims were deceived, leading to total deposits of about $2.3 million to the platform, all of which were appropriated by the alleged trading operation.
A summary excerpt from the judge’s ruling outlining the CFTC’s case against the platform.
The CFTC also accused an individual, Zhāng Chéng Yáng, of serving as a “money mule” for the platform, as his cryptocurrency wallets were utilized to accept and misappropriate victims’ funds.
On March 12, the judge approved a default judgment against Zhāng, determining that the CFTC had sufficiently demonstrated that he controlled a cryptocurrency wallet on OKX, which received digital assets to which he had no legitimate entitlement.
The court noted that OKX was “voluntarily preserving” the cryptocurrency contained in Zhāng’s account and ordered the transfer of its contents, which included $5.70 worth of Tether (USDT) and almost 63 Ether (ETH) valued at around $119,500, to an unnamed victim.
In its January complaint, the CFTC explained that the platform’s operation involved unidentified managers targeting potential victims via social media, luring them to the platform’s deceptive website which marketed itself as a “Blockchain Network Decentralized perpetual contract trading platform” enabling futures trading and “Mining transactions.”
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Staff members of the platform portrayed themselves as women, establishing connections with victims through “continuous and repeated messaging” while sharing alleged pictures of themselves and claiming to be “highly successful digital asset commodities traders,” as per the CFTC.
Once customers set up accounts and transferred their cryptocurrency, the platform provided “fictitious information” regarding customer balances, trading positions, and imagined profits.
“All of this information was likely fabricated,” stated the CFTC. “Evidence indicates that the customers’ digital assets were merely sent to various digital asset wallets to obscure their final destination.”
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