CHICAGO, IL – November 9, 2018 – Joseph Kim, of Phoenix, Arizona, has been ordered to pay over $1.1 million for orchestrating a fraudulent scheme involving Bitcoin and Litecoin, the Commodity Futures Trading Commission (CFTC) announced today.
Kim admitted to misappropriating funds from his former employer, a Chicago-based proprietary trading firm, and subsequently defrauding customers in an attempt to cover his losses. Between September and November 2017, Kim transferred approximately $601,000 worth of Litecoin and Bitcoin from the firm to his personal accounts. He falsely claimed security issues at a virtual currency exchange necessitated the transfers when questioned.
After being terminated from his position, Kim began soliciting funds from at least five customers between December 2017 and March 2018, obtaining approximately $545,000. He misrepresented his departure from the firm, claiming he voluntarily left to start his own company, concealing the fact he was fired for the initial misappropriation. Kim further deceived customers by falsely promising a low-risk arbitrage strategy, instead engaging in high-risk trading that resulted in the complete loss of their funds.
To maintain the deception, Kim sent customers fabricated account statements showing profitable trading activity. The CFTC order requires Kim to pay $1,146,000 in restitution to his former employer and defrauded customers. He is also permanently banned from trading and soliciting virtual currencies, and enjoined from violating the Commodity Exchange Act and CFTC Regulations.
In a parallel criminal case brought by the U.S. Attorney for the Northern District of Illinois, Kim pleaded guilty to one count of wire fraud related to the misappropriated funds and fraudulent solicitation. He was sentenced to 15 months in prison. The CFTC collaborated with the Department of Justice and the Federal Bureau of Investigation on the case, highlighting a commitment to policing the virtual currency markets and protecting investors, according to CFTC Director of Enforcement James McDonald.
Source: CFTC.gov
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