CFTC Claims 'Massive Fraudulent' Scheme Defrauded Investors of $20M

The U.S. Commodity Futures Trading Commission (CFTC) sued a Miami resident and two Israeli nationals Thursday over "two massive fraudulent solicitation schemes," one of which focused on cryptocurrency services.

According to a press release, Miami resident Daniel Fingerhut; Israeli nationals Tal Valariola and Itay Barak; and the latter two's companies Digital Platinum Limited, Digital Platinum Inc. and Huf Mediya conducted a five-year-long trading scheme, promising investors massive profits without actually delivering between 2013 and 2018. The alleged fraud took place in two phases, with the first offering binary options services and the second involving digital assets like bitcoin and ethereum.

The CFTC named a number of other entities and individuals it claims are affiliated with the defendants.

"The fraudulent solicitations promised free access to automated trading software that purported to trade digital assets on behalf of customers automatically with no risk and guaranteed profits ('DA Trading Systems')," the complaint said.

The digital asset phase allegedly took place between 2016 and 2018 (the cryptocurrency bull market, which saw bitcoin's price rise to nearly $20,000, occurred in late 2017).

According to the complaint, Fingerhut sent automated emails with links to potential victims, directing them to brokers if they clicked on the links and signed up. The victims would pay the brokers a deposit, and the defendants would receive a commission.

Nearly 60,000 customers "opened and funded trading accounts," sending more than $20 million in commissions to the defendants, the CFTC alleged. The agency is seeking full restitution, though it warned that the defendants might not have sufficient funds to pay back its investors.

In its complaint, the CFTC claimed Fingerhut initially mislead the agency's staffers after agreeing to cooperate in 2018.