A Bitcoin fraudster who pocketed $7 million he had been sent by clients to buy BTC on their behalf has been hit with charges by the U.S. Commodity Futures Trading Commission (CFTC). Jon Thompson of Easton, Pennsylvania, has been accused of “knowingly or recklessly making false representations to customers” after he funneled the money away and never bought so much as one satoshi with it, lying to the clients about the status of the purchase.
ENFORCEMENT NEWS: CFTC Charges Individual with Multi-Million Dollar Bitcoin Fraud https://t.co/Q9OsdAIVq4
— CFTC (@CFTC) September 30, 2019
Claims of Minimized Risk
Thompson’s scam went down in the summer of 2018, when he induced two investors to engage in cryptocurrency transactions through his escrow company, Volantis Market Making. Thompson said that a transaction structure within the company, which he called “minimize[d] settlement default risk” would eliminate any risk of loss during the purchase, also claiming that because his company acted as a custodian of assets for “both sides of the transaction” there was no risk of default. This was enough to convince one investor to hand over $3 million, which Thompson sent to a third-party, purportedly in order to purchase the BTC, although none arrived. Thompson lied about the state of the transaction, going so far as to produce false bank statements. While this scam was going on he also convinced another individual to hand over $4 million, pulling the same tricks and lying about the whereabouts of the BTC. Neither client has ever seen the BTC or their money again, according to the charges.
A Timely Warning
Once the authorities were made aware of Thompson’s activities they were quick to act, with the FBI joining forces with the CFTC to apprehend him. He is charged with two counts of commodities fraud and two counts of wire fraud, with a maximum sentence of 60 years possible for the offences. FBI Assistant Director-in-Charge William F. Sweeney Jr. summed up how Thompson managed to manipulate his victims into handing over the money, using a method we have seen time and time again with crypto scams, and one that should act as a warning to all:
Thompson allegedly thought no one would ask where their actual money went when they trusted him to invest in Bitcoin. Using phrases and terminology that the victim companies didn’t understand, he allegedly preyed on their ignorance of the emerging cryptocurrency.