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Thursday, December 7, 2023

CFTC Targets Mosaic Exchange Limited in Alleged Crypto Fraud Case

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The US commodities regulator has targeted yet another crypto exchange for allegedly running a “fraudulent” digital asset commodity scheme,

The Commodity Futures Trading Commission (CFTC) filed a civil enforcement action in the US District Court for the Southern District of Florida against Pennsylvania-headquartered Mosaic Exchange Limited, along with its owner and Chief Executive Officer Sean Michael, for operating a fraudulent digital asset commodity scheme.

The CFTC alleged that Mosaic and its operators fraudulently solicited and induced at least 17 people in the US and other countries to give them hundreds of thousands of dollars worth of bitcoin or other funds to trade BTC and other digital asset commodities on the customer’s behalf but instead ended up misappropriating them.

CFTC’s Allegations Against Mosaic

Between February 2019 and June 2021, one of the false representations made by Mosaic was that it had significant assets under management, suggesting it was a substantial player in the cryptocurrency trading market.

During the same period, the complaint claimed that Mosaic had developed a proprietary trading algorithm with an impressive 82% accuracy rate, which was used to generate substantial profits for customers.

Another false claim was that Mosaic consistently achieved high-profit margins, ranging from 20% to 60% per month and sometimes even exceeding 50%, implying that it was a highly profitable investment opportunity.

Mosaic and its CEO also falsely claimed to have established partnerships or broker agreements with certain crypto exchanges in a bid to add credibility to its operation.

In reality, the CFTC states that Mosaic did not possess the substantial assets under management as advertised, suggesting that it was not as financially robust as claimed. Contrary to the representation of an 82% accurate trading algorithm, Mosaic was found to have incurred losses while trading for its customers, undermining the trust and credibility of the platform.

Moreover, the profit margins were also unsubstantiated, as alleged in the complaint. Mosaic also did not consistently achieve the high returns promised to investors. The complaint further asserts that the platform did not have the partnerships or broker agreements that were advertised, potentially misleading customers about the platform’s legitimacy.

A Sham and Virtual House of Cards

CFTC Commissioner Kristin Johnson called the entire scheme a “sham” and a “virtual house of cards” that resulted in unsuspecting investors losing massive hard-earned wealth. Johnson further added,

“This matter also exemplifies just several risks that I raised alarms about and invited greater coordinated enforcement to prevent. Historically, United States financial regulators accomplish their goals of customer protection and market integrity by focusing on regulatory requirements at the point of intermediation”

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