The Commodity Futures Trading Commission (CFTC) won a major victory in a trial against Patrick K. McDonnell and CabbageTech Crop, a company that operated as Coin Drop Markets. McDonnel and his company received penalties and refunds for over $ 1.1 million as they were found guilty of fraud. The fraud accusations introduced by the CFTC concerned virtual currencies including Bitcoin and Litecoin.
"Viciously defrauding customers"
Judge Jack B. Weinstein of the US District Court for the Eastern New York District found that McDonnell and CDM engaged in a deceptive and fraudulent virtual currency scheme for induce customers to send money and virtual currencies to CDM. The victims did so in exchange for expert advice in virtual currency in real time and for the purchase and trading of virtual currency on behalf of clients under the direction of McDonnell. McDonnell simply stole the customers' funds. The memorandum of the 139-page observations described extensive acts of fraud that defined the operation as a "boiler room layout". The defendant used the fictitious offices on Wall Street, a wide range of social media accounts and lied about his trading experience and track record. The memorandum indicates that McDonnell invented false reports of imaginary profits to deceive his victims. "McDonnell and CDM have used their fraudulent solicitations to obtain and therefore retain customers' funds – as the decision noted, McDonnell" has ruthlessly misled the clients and diverted their funds. "
McDonnell sought to cover his tracks removing your website and deleting social media
CDM customers lost most or all of their money.
McDonnell defended himself in court and refused to look for an outside consultant, even though the court urged him to do so
James McDonald, director of application of the CFTC, commented the verdict;
"As clarified by the court's judgment, the CFTC will continue to act aggressively to identify the bad actors involved in virtual currencies and make them responsible. This case also shows the availability of the CFTC to prove its case to the process. "
The Court had previously signed a preliminary injunction order in favor of the CFTC and against McDonnell and CabbageTech, Corp., noting that the CFTC had shown that the Defendants would continue to violate the Commodity Exchange Act (CEA) without the 39. Intervention by the court and that the CFTC anti-fraud authority applies unequivocally to the use or attempt to use any manipulative or deceptive device in connection with a contract of sale of any goods in interstate commerce, including the virtual currencies involved in this matter
McDonnell is required to pay $ 290,429.29 in customer restitution and $ 871,287.87 civil fines.The final ruling imposed permanent trade and registration prohibits the Defendants, and I permanently urge further violations of the Commodity Exchange Act and the CFTC regulations.
The CFTC added that orders that r repayment of funds to victims can not result in the recovery of lost money because the perpetrators may not have sufficient funds.