The owners of binary options company Blue Bit Banc are facing big fines for a scheme that involved the cryptocurrency ATM Coin.
Blake Harrison Kantor and Nathan Mullins are facing the punishment after the U.S. Commodity Futures Trading Commission (CFTC) revealed they had committed fraud and misappropriated client funds. The federal courts agreed with the accusations.
The case began when CFTC filed a case in April 2018. It accused Kantor and Mullins of having run a fraud scheme. The CFTC stated that Kantor and Mullins had solicited public customers to invest in binary options, promising they would get the opportunity to be paid predetermined amounts based upon the price of the commodities.
However, what they did not reveal was that they were using a computer program to fraudulently alter data associated with their binary options investments so that the probability of investors earning a profit favoured Blue Bit Banc and disadvantaged investors.
They also told clients to send the money to bank accounts on the island nation of St. Kitts and Nevis, making it more difficult to trace investor funds. The defendants also converted Blue Bit Banc investments into ATM Coin, a worthless cryptocurrency that Kantor had misleadingly told investors was worth substantial sums of money.
One federal court has now ordered Kantor and Mullins to pay over $4.25m. The fine includes an order of restitution of $846,405, a civil monetary penalty of $2.5m against Kantor and the corporate entities he ran and a penalty of $300,000 against Mullins.
Both defendants were also ordered to disgorge ill-gotten gains of a combined $605,333. Additionally, Blue Wolf Sales Consultants, a New York company owned by Kantor, was ordered to disgorge $463,097.
In a related court case, the Kantor has pleaded guilty to conspiracy to commit wire fraud and admitted to obstructing an investigation into his crimes. He now faces 86 months in jail.
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