The US Commodity Futures Trading Commission (CFTC) has taken legal action against Mosaic Exchange Limited, a cryptocurrency trading platform, and its owner, Sean Michael.
According to a press release issued on September 27, the CFTC revealed that this Pennsylvania-based limited liability company and its founder were engaged in fraudulent activities related to digital asset commodities.
This illicit operation transpired between February 2019 and June 2021, going unnoticed until it caught the attention of the regulatory agency. The CFTC asserted that Mosaic Exchange portrayed itself as a legitimate Bitcoin trading platform, claiming to manage tens of millions of dollars in assets.
Under the guise of being a reputable entity, the platform deceptively acquired hundreds of thousands of dollars worth of Bitcoin and other assets from 17 US residents and individuals from other countries. They promised to trade these assets in the cryptocurrency market on behalf of their clients. Unfortunately, instead of fulfilling their promises, Mosaic Exchange misappropriated the received funds.
The CFTC provided further insight, disclosing that the fraudulent crypto operation enticed victims with the promise of an in-house proprietary trading algorithm that supposedly yielded monthly returns ranging from 20% to 60%. To add to the deception, Mosaic Exchange Limited also claimed to have broker agreements and partnerships with undisclosed giants in the Bitcoin exchange realm.
Upon conducting a thorough investigation, the CFTC uncovered that the cryptocurrency operation was far from legitimate and had never possessed the millions of dollars in assets it had boasted about. Additionally, the government agency revealed that the crypto exchange had no valid broker agreements with other entities in the crypto space and operated independently.
Addressing the prevalence of investment scams within the crypto market, CFTC Commissioner Kristin N. Johnson described the entire Mosaic Exchange incident as a virtual house of cards. She emphasized the growing need for enhanced investor protection, given the increasing number of investment scams in the burgeoning crypto industry.
This sentiment is supported by the findings of a Chainalysis report, which highlighted investment scams as the most common method used by fraudulent actors. The report noted a 77% decrease in such scams compared to the previous year, attributed to heightened investor awareness and the exit of two prominent scam operations, VidiLook and Chia Tai Tianqing Pharmaceutical Financial Management.
Nevertheless, the crypto industry remains susceptible to threats like ransomware. The crypto crime sector has already exceeded the funds locked in by $175.8 million compared to the same period in 2022, with criminals investing in sophisticated software to pilfer funds from investors’ crypto wallets.
Meanwhile, the US Department of the Treasury is intensifying its efforts to combat this crypto crime segment, recently imposing sanctions on three over-the-counter (OTC) cryptocurrency traders for providing substantial support to the infamous North Korean Lazarus Group. These individuals were alleged to have assisted the cybercriminal organization in converting millions of dollars worth of cryptocurrencies into fiat currency.