U.S DOJ Indicts Crypto Trader for Running Ponzi Scheme

The United States government has brought legal action against a crypto trader for alleged links to a Ponzi scheme. The Justice Department announced that it had arrested Jeremy Spence, a Rhode Island-based crypto trader who allegedly operated Coin Signals, a known Ponzi scheme.

A Good Old Ponzi Scheme

According to the announcement, Spence operated Coin Signals between 2017 and 2019. The platform, which he ran through Discord and Twitter, presented itself as a top-notch crypto exchange and investment platform. However, Spence had carefully misrepresented the platform’s success and business to draw customers.

In the announcement, William Sweeney, the Assistant Director-in-Charge at the Federal Bureau of Investigation (FBI) said:

“Because his trading was less than profitable and significantly less successful than he represented to investors, he used money from new investors to pay off others in order to keep his plan moving — a typical marker of a Ponzi scheme.”

Along with the Justice Department, Spence has also been charged by the Commodity Futures Trading Commission (CFTC). The agency unveiled its civil fraud charges against Spence earlier today, looking to return the trader’s ill-gotten gains to investors and ban him from all trading activity.

A criminal complaint unveiled with the announcement pointed out that Spence made trades via BitMEX, the industry’s top derivatives exchange. He deceived investors with claims of using his BitMEX contacts to achieve high returns on trades. As of 2018, he has falsified records of having over 1,000 BTC in his fund. In reality, his company’s account never had over 11 BTC in any instance.

It is unclear when Spence’s trial will begin. However, if he is found guilty, he could face ten years in prison for commodities fraud and another 20 years for wire fraud. 

DOJ and CFTC Hammer Hits BitMEX

Interestingly, the Justice Department and CFTC have also filed cases against BitMEX. Last October, both agencies accused the derivatives exchange of illegally offering its services to customers in the United States, despite being banned in the country.

The CFTC’s suit alleged that BitMEX had offered leverage trading to the tune of $1 trillion since its inception in 2014. The agency added that despite its success, the exchange failed to provide the most basic compliance and identity verification procedures.

In addition, the suit alleged that BitMEX’s former chief executive Arthur Hayes – as well as executives Gregory Dwyer and Ben Delo – had violated the Bank Secrecy Act through several of their actions. Since then, BitMEX had sought to put its affairs in order. The company’s top execs including Hayes stepped down, while others were placed on indefinite leave. The exchange also announced Alexander Hoptner as its new CEO.