CFTC roundup: assets fraud and misappropriation of investor’s funds

Two big fraud schemes feature in the latest of our regular regulatory roundups.

Last week, we reported that Goldman Sachs was fined $15m for violating the CFTC’s Business Conduct Standards, and failing to disclose PTMMMs. The company also allegedly traded at times that were financially advantageous to the company and disadvantageous to the clients.

Besides this charge, two other actions were taken by the CFTC and the US District Court for the Southern District of Florida.

Florida man and his two firms ordered to pay over $16m for fraud, misappropriation, and making false statements to the CFTC – April 12, 2023

Following a consent order against Damian Castilla on December 6, 2022, the US District Court for the Southern District of Florida has now also entered an order for final judgment against his entities DCAST Capital Investments LLC and Five Traders LLC on April 6.

These orders resolve the CFTC’s lawsuit of May 17, 2022, and find the defendants accountable for defrauding over 50 pool participants by fraudulently soliciting investments and misappropriating the participants’ funds. They also resolve CFTC charges over false statements that the defendants made to the CFTC during its investigation.

According to the CFTC, the defendants fraudulently issued false account statements that showed profitable results in nonexistent trading accounts, including using some of the pool funds to pay fake profits to earlier pool participants.

The orders have required the defendants to pay $2,687,440 in restitution to defrauded pool participants, plus $3,350,000 in disgorgement. Castilla is also required to pay a $3m civil monetary penalty, and DCAST Capital and Five Traders collectively $10,050,000 in civil monetary penalties.

The orders also enjoin the defendants from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, including imposing permanent trading and registration bans against defendants.

“The defendants used pool participant funds for car payments, home remodeling, lawn services, clothing, dining, and other personal expenses.”


New York resident caught in fraud scheme over digital assets – April 11, 2023

Rashawn Russell has been charged for fraudulently soliciting retail investors to invest in a digital asset trading fund, including misappropriating more than $1m of investor assets. Allegedly, between November 2020 and through July 2022, Russell solicited retail investors to invest bitcoin, ether, and fiat currency into a digital assets trading fund – with the guarantee of no losses, and a minimum 25% return in some instances.

The CFTC is seeking restitution, disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations.

“As today’s action demonstrates, the CFTC is unrelenting in holding bad actors accountable and protecting retail investors from fraud in the digital asset space.”  

Ian McGinley, CFTC, Director of Enforcement