For Two Years They Scammed Crypto Investors. Now Must Pay $1.1 Million

A Florida federal court has ordered Mosaic Exchange Ltd and its CEO Sean Michael to pay over $1.1 million in penalties and restitution for operating a fraudulent digital asset trading scheme that targeted investors across multiple countries.

CFTC Secures $1.1 Million Judgment Against Crypto Exchange

The U.S. District Court for the Southern District of Florida issued final default judgments in late December, concluding a case that began with the Commodity Futures Trading Commission's (CFTC) September 2023 complaint against the Pennsylvania-based company and its Miami-based executive.

The court found Mosaic and Michael liable for violating the Commodity Exchange Act through a sophisticated deception that ran from February 2019 to June 2021. The scheme lured 18 investors with false claims about the company's assets under management, trading performance, and partnerships with cryptocurrency exchanges.

The monetary penalties include approximately $468,600 in restitution to defrauded customers, $60,980 in disgorgement of ill-gotten gains, and a $660,000 civil penalty.

“The order also permanently enjoins them from engaging in conduct that violates the CEA, as charged, and permanently bans them from registering with the CFTC and from trading in any CFTC-regulated markets,” CFTC explained.

Mosaic Exchange Ltd. and CEO Ordered to Pay Over $1.1 Million for Fraudulent Digital Asset Commodity Scheme: https://t.co/6U3yPBg4ms

Court documents reveal that Mosaic falsely advertised tens of millions in managed assets and claimed their proprietary algorithm achieved an 82% accuracy rate. The firm promoted monthly returns ranging from 20% to 60%, but investigators found these figures were based on projections rather than actual results.

“However, the order finds Mosaic did not have the assets under management as represented; Mosaic did not generate win rates as represented but rather hypothetical projections—i.e., not actual trading,” the CFTC commented in its official statement.

CFTC vs. Crypto

The regulator has maintained an active role in cryptocurrency regulation, issuing several statements and updates over the past month.

Last week, Gemini Trust Company, a cryptocurrency exchange founded by Cameron and Tyler Winklevoss, reached a $5 million settlement with the CFTC. The settlement resolves allegations that Gemini provided misleading information to regulators during its efforts to gain approval for a Bitcoin futures contract.

The lawsuit, filed in 2022 in Manhattan federal court, accused Gemini of making “false and misleading statements” about measures to prevent price manipulation. The case was concluded shortly before it was scheduled to go to trial.

In another development, a federal court ordered five individuals linked to Icomtech to pay over $5 million in penalties for orchestrating a fraudulent digital asset scheme. The U.S. District Court for the Central District of California determined that the individuals solicited more than $1 million from 190 investors between August 2018 and December 2019, promising daily returns of up to 2.8% through Bitcoin and other cryptocurrency trading.

Additionally, in December, the CFTC charged a Washington state pastor with running a $5.9 million cryptocurrency fraud scheme. According to the commission, the scheme primarily targeted Spanish-speaking members of the pastor's congregation, promising significant returns but ultimately defrauding participants.