On Wednesday, the U.S. Commodity Futures Trading Commission (CFTC) revealed that it has filed a lawsuit against the creators of My Big Coin, an alleged cryptocurrency scam that took naive investors for $6 million.
The case, filed on January 16 and unsealed today, charges Randall Crater, Mark Gillespie and My Big Coin Pay, Inc. with commodity fraud and misappropriation of funds raised for a virtual currency known as My Big Coin (MBC).
The misappropriation charges include “transferring customer funds into personal bank accounts, and using those funds for personal expenses and the purchase of luxury goods” including “home, antiques, fine art, jewelry, luxury goods, furniture, interior decorating and other home improvement services, travel, and entertainment.” Sounds about right for a cryptocurrency scam.
As the CFTC details, the two named defendants operated a website for the nonexistent cryptocurrency that made a number of false and misleading claims, including characterizing the coin as being actively traded on multiple exchanges (it wasn’t) and stating the daily trading price for a coin that never existed. The pair behind My Big Coin also claimed that the coin was backed by gold and was partnering with MasterCard, two obviously false assertions.
“In reality, as alleged, the supposed trading results were illusory, and any payouts to customers were derived from funds fraudulently obtained from other customers in the manner of a Ponzi scheme,” the CFTC write-up summarizes.
My Big Coin might be the latest cautionary tale in the vast sea of coin scams, but it and the others we know now are just the tip of the iceberg. As international regulators scramble to catch up to a strange new world that popped up under their noses, you can bet for every legitimate ICO or coin project there’s a wave of sketchy ones waiting to rip off greedy investors who don’t know better.
As there is no formal body that sorts out legitimate projects from blatant Ponzi schemes, it’s crucial to do thorough research of your own before investing in anything. Always. If you’d like to study the anatomy of a scam, Crater’s own MyBigCoin website offers a useful post-mortem — just please don’t send that guy your money.
“As this case shows, the CFTC is actively policing the virtual currency markets and will vigorously enforce the anti-fraud provisions of the Commodity Exchange Act,” CFTC Director of Enforcement James McDonald said of the case.
“In addition to harming customers, fraud in connection with virtual currencies inhibits potentially market-enhancing developments in this area. We caution potential virtual currency customers, once again, that they should engage in appropriate diligence before purchasing virtual currencies.”