CFTC sues Cash FX over $950M crypto-linked forex Ponzi scheme

The Commodity Futures Trading Commission filed a civil complaint Friday in the U.S. District Court for the Middle District of Florida accusing Cash FX Group and three individuals of running a $950 million crypto-linked foreign-exchange Ponzi scheme.

The defendants named in the complaint are Cash FX and its chief executive, Huascar Jose Lopez Castillo of Brazil; The Conversion Pros and its chief executive, Ronald Pope of Oregon; and Justin Halladay of Florida. The CFTC alleges the group operated a multilevel marketing program that solicited and accepted more than $950 million for a commodity pool presented as trading retail foreign currency contracts.

According to the complaint, the defendants promised investors returns of up to 15% weekly and told participants that pool funds were managed by expert traders, proprietary algorithms and artificial intelligence. The agency alleges those representations were false and that Cash FX conducted only limited forex trading while using most participant funds for other purposes.

The CFTC further alleges the defendants paid earlier participants with money from newer investors, a pattern the complaint describes as characteristic of a Ponzi scheme. The agency says the defendants diverted millions of dollars to themselves and issued false account statements to participants. The complaint estimates investor losses of at least $406 million.

The suit asks the court to hold the defendants liable and to recover funds for harmed investors. The CFTC has been reviewing trading platforms and investment programs that involve digital assets and foreign-exchange products and has submitted regulatory proposals to the White House for review as part of its oversight efforts.

David I. Miller, the CFTC’s director of enforcement, wrote in a statement: “The Division of Enforcement has continued to refocus on its core mission of protecting the public from fraud and manipulation. This critical action, and the massive fraud it targets, reflects our steadfast commitment to addressing fraud wherever we find it.”

The complaint will move through the federal court process, where plaintiffs and defendants will present evidence and legal arguments on the allegations.