A New York federal court has ordered more US$1.1 million in penalties and restitution against the operator of a virtual currency scheme, the U.S. Commodity Futures Trading Commission (CFTC) announced Friday.
The court found that CabbageTech Corp., which operates as Coin Drop Markets (CDM), and Patrick McDonnell, the firm’s founder “engaged in a deceptive and fraudulent virtual currency scheme to induce customers to send money and virtual currencies to CDM, purportedly in exchange for real-time expert virtual currency trading advice and for virtual currency purchasing and trading on behalf of the customers under McDonnell’s direction,” the CFTC says in a news release.
The court found “the supposedly expert, real-time virtual currency advice was never provided, and customers who provided funds to McDonnell and CDM to purchase or trade on their behalf never saw those funds again.” It also found they took steps to conceal their scheme by taking down their website and social media materials and ceasing communicating with their customers.
The court ordered CDM and McDonnell to pay US$290,429 in restitution to customers, and a US$871,287 civil monetary penalty. It also imposed permanent trading and registration bans.
“As the court’s judgment makes clear, the CFTC will continue to act aggressively to identify bad actors involved in virtual currencies and hold them accountable. This case also shows the CFTC’s readiness to prove its case at trial,” says James McDonald, CFTC director of enforcement, in a statement.