CFTC Hits Mastermind of Control-Finance Scam with $570M Fine

Benjamin Reynolds, the mastermind behind a massive Bitcoin Ponzi scheme, must pay the CFTC a whopping $572 million in penalty and restitution after a federal judge in New York entered a default judgment against him.

The US Commodity Futures Trading Commission accuses Reynolds of running a pyramid scheme called Control-Finance, which was fraudulently promoted as a UK-based cryptocurrency investment company.

In a complaint filed in 2019, the agency said the fictional CEO obtained and misappropriated more than 22,800 bitcoin (worth more than $1.24 billion) from more than 1,000 customers.

In order to extract bitcoin from investors, Control-Finance lured them with promises of guaranteed 1.5 percent a day, or 45 percent a month, which they described in weekly fabricated trade reports.

The fraudulent scheme operated between May and September 2017, advertising profits from a trading pool that never actually generated any returns.

For new participants, they were assured to receive guaranteed annual returns, while they were actually duped into a Ponzi scheme. ‎

“While Reynolds represented that he would return all bitcoin deposits to customers of Control-Finance by late October 2017, he never did and instead retained the deposits for his own personal use. Customers lost most or all of their bitcoin deposits as a result of the scheme,” the CFTC said.

The watchdog said Reynolds’ Control-Finance in reality did no trading and made no profits for customers. Instead, they laundered the stolen funds through thousands of circuitous Blockchain transactions. In the course of his scheme, the defendant transferred part of the stolen assets to bank accounts in offshore tax havens like the Seychelles islands.

In addition, the court papers allege that the Ponzi-scheme creator forged the UK Companies House documents to convince their victims that they were operating a regulated business.

In September 2017, Control-Finance shut down its social media pages, but the CFTC failed to locate Reynolds since it uncovered the illicit enterprises in June 2019. As such, the agency asked the New York court to settle the case in his absence.

Today’s default order enables US authorities to pursue any available assets, especially those in the United States, to satisfy the judgments.

As the scam’s director has vanished, the CFTC cautions victims that restitution orders may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds.