Patrick K. McDonnell of Staten Island, New York, has been ordered to pay over $1.1 million in penalties and restitution following a federal court ruling in a case brought by the Commodity Futures Trading Commission (CFTC). The judgment, entered on August 24, 2018, stems from allegations of fraud related to virtual currencies like Bitcoin and Litecoin.
According to court documents, Judge Jack B. Weinstein of the U.S. District Court for the Eastern District of New York found McDonnell and his company, CabbageTech, Corp. d/b/a Coin Drop Markets (CDM), engaged in a deceptive scheme from approximately January 2017 through July 2017. They allegedly induced customers to send funds and virtual currencies with promises of expert trading advice and virtual currency purchasing/trading services.
The court determined these promises were false. McDonnell is accused of misappropriating customer funds, described by the judge as a “vicious defrauding of customers.” The 139-page Memorandum detailing the decision found that no expert trading advice was ever provided, and customers who entrusted funds to McDonnell and CDM never recovered their investments.
To conceal the alleged fraud, McDonnell and CDM reportedly removed their website and social media presence, ceasing communication with customers. The CFTC’s complaint, originally filed on January 18, 2018, led to a preliminary injunction against McDonnell and CabbageTech, establishing the CFTC’s authority over fraud involving virtual currencies.
The court’s final judgment requires McDonnell and CabbageTech, jointly and severally, to pay $290,429.29. James McDonald, the CFTC’s Director of Enforcement, stated the agency will “continue to act aggressively” against bad actors in the virtual currency space and is prepared to litigate cases through trial. Neither McDonnell nor CabbageTech was registered with the CFTC.
Source: CFTC.gov
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