The Commodity Futures Trading Commission filed suit Friday in the U.S. District Court for the Middle District of Florida against Cash FX Group, its CEO Huascar Jose Lopez Castillo of Brazil, The Conversion Pros and its CEO Ronald Pope of Oregon, and Justin Halladay of Florida.
The CFTC alleges the defendants operated a multilevel marketing Ponzi scheme that solicited and accepted over $950 million from participants for purported retail foreign currency trading within a commodity pool. Cash FX Group falsely claimed expert traders, proprietary algorithms and artificial intelligence managed the funds and promised investors returns up to 15 percent weekly.
Instead of trading, the defendants misappropriated most participant funds, using new contributions to pay fictitious trading profits to earlier investors. The CFTC alleges Cash FX Group conducted minimal actual forex trading and provided false accounting statements to participants. Millions of dollars were directly funneled to each defendant from scheme operations.
Participants ultimately lost at least $406 million. "The Division of Enforcement has continued to refocus on its core mission of protecting the public from fraud and manipulation," said David I. Miller, the CFTC's Division of Enforcement Director. "This critical action reflects our steadfast commitment to addressing fraud wherever we find it."
The enforcement action follows the CFTC's submission of new crypto asset transaction and market regulations for White House review on Sept. 18. The regulatory push comes days after the Senate failed to advance the CLARITY Act, legislation that would establish a federal framework for crypto markets and define which digital assets are securities or commodities.
