The Commodity Futures Trading Commission (CFTC) has initiated a civil enforcement action against Rashawn Russell, an ex-Deutsche Bank investment banker, in the US District Court for the Eastern District of New York.
The accusation claims that Russell fraudulently solicited retail investors to invest in a digital asset trading fund, resulting in nearly $1 million defrauded from investors. The CFTC has charged him with one count of wire fraud.
According to the press release, from November 2020 to July 2022, Russell asked retail investors to invest Bitcoin, Ether, and fiat currency in his proposed proprietary digital asset trading fund. He guaranteed that investors would not incur any losses and promised a minimum 25% return on investment.
The complaint charged Russell with intentionally making false statements about the structure, size, and fund performance, as well as making false promises to compensate investors in USDC and pay withdrawal requests. The funds were then used to pay for Russell’s personal expenses, entities linked to gambling activities, and Ponzi-like payments to current investors.
The CFTC has requested restitution, disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against future violations of the Commodity Exchange Act (CEA) and CFTC regulations in the litigation against Russell.
Ian McGinley, CFTC’s Director of Enforcement, stated, «As today’s action demonstrates, the CFTC is unrelenting in holding bad actors accountable and protecting retail investors from fraud in the digital asset space.»
Contrasting Views by SEC and CFTC
The US Securities and Exchange Commission considers certain crypto assets as securities, while the CFTC has reinforced that Bitcoin and Ether are commodities in the latest crypto fraud and misappropriation lawsuit.
The lawsuit highlighted the lack of consensus between the two agencies and how this leaves the question of how regulators, such as the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation, view the asset class.