The Commodity Futures Trading Commission brought its first “romance scam” case on Thursday after it found a company misappropriated $1.3 million in customer funds that were intended to be used for digital asset trading.
At least 29 customers transferred funds to California company Justby International Auctions to trade digital assets and forex on “supposedly legitimate trading platforms,” the CFTC said in the complaint. But those funds were not used to trade, and Justby CEO Cunwen Zhu instead used some of the funds for his personal use and transferred the majority to others involved, the agency said.
The CFTC said “solicitors” reached out to customers on social media and “pretended to befriend or romance the customers” in an effort to have them open accounts.
“As people sought to escape the isolation of the pandemic and form a connection to others online, fraudsters saw a new venue to prey on and to take advantage of the public,” CFTC Director of Enforcement Ian McGinley said in the statement.
The alleged scheme
From April 2021 through March 2022, Zhu and Justby accepted and misappropriated $1.3 million from customers, according to the CFTC.
“Solicitors established a rapport with the Scheme Customers by messaging them frequently, sharing purported pictures of themselves in expensive locales or with expensive items such as luxury cars,” the CFTC said in the complaint. “The Solicitor always claimed to be a highly successful trader and usually attributed their success to an ‘uncle’ or an ‘insider’ who provided them with inside knowledge.”
Customers were also given false records “to maintain the pretense that they were engaged in actual trading,” the agency said.
The agency is seeking restitution to defrauded customers, disgorgement of ill-gotten gains, civil monetary penalties, trading bans, and a permanent injunction against further violations of CFTC regulations.
Zhu was also charged with one count of wire fraud in the Middle District of Florida back in April, the CFTC said.
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