The Commodity Futures Trading Commission (CFTC) has filed a federal civil enforcement action against Patrick K. McDonnell, of Staten Island, New York, and CabbageTech, Corp. d/b/a Coin Drop Markets (CDM), alleging fraud and misappropriation related to Bitcoin and Litecoin purchases and trading.
The complaint, filed in the U.S. District Court for the Eastern District of New York, accuses McDonnell and CDM of operating a deceptive scheme from approximately January 2017 through January 2018. They allegedly induced customers to send funds and virtual currencies to CDM with the promise of real-time trading advice and virtual currency purchasing/trading services under McDonnell’s direction.
According to the CFTC, the promised expert advice was never delivered, and customers who entrusted funds to McDonnell and CDM never recovered them. The agency alleges that the defendants misappropriated customer funds after soliciting them under false pretenses.
To further conceal the scheme, McDonnell and CDM allegedly removed their website and social media presence, ceasing all communication with customers, who subsequently lost most or all of their investments. The CFTC also noted that neither McDonnell nor CDM were registered with the agency.
The CFTC is seeking restitution for defrauded customers, disgorgement of ill-gotten gains, civil monetary penalties, trading bans, and a permanent injunction against future violations of federal commodities laws. The case is being pursued by the CFTC’s Division of Enforcement Virtual Currency Task Force, led by staff members Gates S. Hurand, David Oakland, Christopher Giglio, K. Brent Tomer, Lenel Hickson, Jr., and Manal M. Sultan.
The CFTC has previously issued warnings to the public regarding the risks associated with virtual currency trading, including a Customer Advisory on the Risks of Virtual Currency Trading and several Fraud Advisories outlining common warning signs of fraudulent schemes.
Source: CFTC.gov
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