Former bitcoin and litecoin trader gets $1.1 million fine and 15 months for fraudulent crypto scheme

The Commodity Futures Trading Commission has issued an order and settled charges against a former trader accused of running a fraudulent scheme that led to more than $1 million in losses, of which he misappropriated more than $600,000

What has happened?

The Commodity Futures Trading Commission (CFTC) has issued an order and settled charges against a former trader accused of running a fraudulent bitcoin and litecoin scheme.

What does this mean?

According to the CFTC press release, Joseph Kim, from Arizona, admitted to orchestrating a fraudulent bitcoin and litecoin scheme that led to more than $1 million in losses, of which he misappropriated more than $600,000.

In a separate action, Kim was sentenced to 15 months on related charges filed in the District Court for the Northern District of Illinois.

According to the CFTC order, between September and November 2017, Kim transferred bitcoin and litecoin from his employer, a Chicago-based trading firm, to his own personal accounts.

When questioned about the missing cryptocurrencies, Kim allegedly falsely represented "that there were security issues with a virtual currency exchange that necessitated transfers into various accounts".

Kim's employer discovered the misappropriation in November 2017 and fired him, but at this point it had lost about $601,000 to his scheme.

Kim then began "fraudulently soliciting funds" from individual customers to continue trading in virtual currency in the hope of making enough profit to repay his former employer.

Between around December 2017 and around March 2017, Kim fraudulently obtained about $545,000 from at least five customers.

According to the CFTC, Kim told customers that he had voluntarily left his employer to start his own trading company and also falsely told them that he would invest their funds in a low-risk virtual currency arbitrage strategy, when in fact, he made high-risk, directional bets on the movement of virtual currencies and lost $545,000 of his customers' funds.

"Kim concealed those losses by sending false account statements to customers reflecting profitable trading," the CFTC said.

In addition to a $1.146 million fine in restitution to Kim's former employer and customers, the CFTC has imposed permanent trading and registration bans on Kim.

In a separate action brought by the U.S. Attorney for the Northern District of Illinois, Kim pleaded guilty to one count of wire fraud in connection with the misappropriation of approximately $601,000 of litecoin and bitcoin from his employer, and fraudulent solicitation of $545,000 in funds from investors.

Kim was sentenced to 15 months.

Next steps

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Contacts
Gregory Lisa
Partner
Washington D.C.
Evan Koster
Partner
New York
Languages English
Topics Blockchain
Countries United States

 

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