CFTC Takes Action Against Crypto Fraud Following Enforcement Shift

The agency revealed that Rashawn Russell has been charged with fraud in connection with a digital asset trading scheme, marking one of the first cases pursued under acting Chair Caroline Pham’s leadership.

The Feb. 10 consent order, issued by the U.S. District Court for the Eastern District of New York, found that Russell engaged in a fraudulent scheme between 2020 and 2022, soliciting investors to contribute cryptocurrency to a fund he misrepresented.

The court’s order requires him to pay more than $1.5 million in restitution to defrauded investors. Additionally, Russell is permanently banned from trading in CFTC-regulated markets on behalf of others and prohibited from registering with the agency. The ruling also imposes an eight-year ban on his personal trading activities.

CFTC announces on X about Federal Courts Orders. Source: CFTC on X

The enforcement action follows a broader restructuring within the CFTC’s Division of Enforcement. On Feb. 4, Pham announced that the commission would prioritize targeting fraud, moving away from what some have criticized as regulation through enforcement. The restructuring has resulted in the formation of two specialized task forces: one focused on retail fraud and another addressing complex fraud and market manipulation.

The commission’s realignment comes amid broader regulatory shifts in Washington, particularly following changes in leadership at the Securities and Exchange Commission (SEC). In January, the SEC announced the formation of a crypto task force to develop a regulatory framework for digital assets. Meanwhile, the CFTC has signaled that it will focus its enforcement efforts on fraudulent activities rather than broad regulatory crackdowns on crypto firms.

According to court documents, Russell defrauded more than two dozen retail investors by falsely claiming that their cryptocurrency contributions would be traded through his proprietary digital assets fund. The CFTC complaint, filed on Jan. 16, states that Russell “guaranteed no loss to investors, and in some instances, guaranteed a minimum twenty-five percent return.” Instead, he misappropriated the funds for personal expenses, gambling-related payments, and a Ponzi-like scheme to pay previous investors.

Russell’s fraudulent activities also resulted in criminal charges. In a parallel case, he pleaded guilty on Sept. 19, 2023, to one count of wire fraud and an additional count of access device fraud. He was sentenced to over three years in prison, followed by three years of supervised release, and was ordered to pay restitution exceeding $1.5 million.

The CFTC acknowledged assistance from the Department of Justice’s Fraud Section in bringing the case to resolution. The enforcement action against Russell underscores the agency’s evolving approach, reinforcing its commitment to tackling crypto-related fraud while moving away from more contentious regulatory actions.