The Commodity Futures Trading Commission filed a lawsuit against Cash FX Group and three individuals, alleging they ran a $950 million foreign-exchange investment scheme involving cryptocurrency. The complaint, filed Friday in U.S. District Court for the Middle District of Florida, accuses the operation of being a multilevel marketing Ponzi scheme.
The defendants are Cash FX Group, CEO Huascar Jose Lopez Castillo of Brazil, The Conversion Pros, CEO Ronald Pope of Oregon, and Justin Halladay of Florida. They solicited and accepted over $950 million from participants.
The scheme purportedly aimed to trade retail foreign currency contracts within a commodity pool. Cash FX Group falsely claimed that expert traders, proprietary algorithms and artificial intelligence managed the funds. The defendants promised participants weekly returns of up to 15 percent.
The CFTC found that Cash FX engaged in minimal actual forex trading. Instead, the defendants misappropriated most participant funds. New contributions were used to pay fictitious trading profits to earlier investors—a classic Ponzi structure.
Millions of dollars flowed directly to each named defendant. Participants lost at least $406 million, according to the CFTC filing. Cash FX also provided false accounting statements.
"This action reflects our steadfast commitment to addressing fraud wherever we find it," said David I. Miller, Director of Enforcement at the CFTC.
The enforcement action follows aggressive regulatory moves by the CFTC in the digital asset sector. The agency submitted new regulatory actions covering crypto asset transactions and markets for White House review on Sept. 18.
The submission came days after the Senate failed to advance the CLARITY Act, which aimed to establish a federal regulatory framework for crypto markets and define which digital assets are securities versus commodities. Market analysts anticipate the CLARITY Act's failure will trigger aggressive rulemaking from both the SEC and the CFTC.
