The United States Commodity Futures Trading Commission (CFTC) has taken legal action against a California-based man, Cunwen Zhu, and his company Justby International Auctions.
The legal action filed in the U.S. District Court for the Central District of California alleges that the accused was involved in a crypto romance scam that defrauded numerous investors over $1.3 million in digital assets.
According to the CFTC, the defendants used online dating platforms to lure victims into investing in cryptocurrency trading. They promised high returns and convinced their victims to hand over their money, but instead, they used the funds for personal expenses and to make payments to earlier investors.
As filed by the commission, this was its first case relating to crypto romance scams otherwise known as “Pig Butchering.” The commission noted that Zhu and his firm exploited people’s quest to escape isolation from the pandemic to operate the scheme which ran between April 2021 through March 2022.
The CFTC’s enforcement action seeks to hold the defendants accountable for their fraudulent activities and to obtain restitution for the victims. The agency also seeks to impose civil monetary penalties and permanently ban the defendants from engaging in any commodity-related activities.
CFTC Cautions Against Use of Dating Platforms
Meanwhile, crypto scams are becoming increasingly common as the popularity of digital currencies continues to rise. Fraudsters often use social media platforms and other online channels to promote their schemes, promising quick and easy profits to unsuspecting investors. Scammers may use various tactics, such as fake endorsements, celebrity endorsements, and false claims, to lure victims into investing.
However, the CTFC’s enforcement action against the businessman and his company is a reminder that regulators are actively working to protect investors from fraudulent activities in the cryptocurrency market. By taking legal action against the scammers, the agency is sending a strong message that such activities will not be tolerated and that those who engage in them will be held accountable.
Crypto Exploits Continues to Rise
Recall that in May, the blockchain security firm, CertiK reported that bad actors looted more than $103 million of funds from crypto projects and investors in April 2023, in the form of exploits, exit scams, and flash loan attacks.
Likewise, DefiLlama, claimed that Decentralized Finance (DeFi) platforms lost about $21 million to cyber criminals throughout February.
