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The United States Commodity Futures Trading Commission (CFTC) has taken legal action against a man based in California, Cunwen Zhu, and his company Justby International Auctions.
Legal action filed in the US District Court for the Central District of California alleging that the defendants were involved in a crypto romance scam that defrauded multiple investors of more than $1.3 million in digital assets.
According to the CFTC, the defendants used an online dating platform to lure victims into investing in cryptocurrency trading. They promise high returns and convince their victims to hand over their money, but instead, they use the funds for personal expenses and make payments to previous investors.
As filed by the commission, this is the first case relating to the crypto romance scam otherwise known as “Pork Cutting.” The commission noted that Zhu and his company exploited people’s efforts to avoid isolation from the pandemic to operate a scheme that took place between April 2021 and March 2022.
The CFTC’s enforcement action seeks to hold defendants accountable for their fraudulent activities and to obtain restitution for victims. The agency is also seeking to impose civil monetary penalties and permanently bar the defendants from engaging in commodity-related activities.
CFTC Warning Against Use of Dating Platforms
Meanwhile, crypto scams are becoming more and more common as the popularity of digital currencies continues to increase. Fraudsters often use social media platforms and other online channels to promote their schemes, promising unsuspecting investors quick and easy profits. Fraudsters may use a variety of tactics, such as fake endorsements, celebrity endorsements and false claims, to lure victims into investing.
However, the CTFC’s enforcement actions against entrepreneurs and their companies are a reminder that regulators are actively working to protect investors from fraudulent activity in the cryptocurrency market. By taking legal action against the fraudsters, the agency is sending a strong message that such activities will not be tolerated and those involved in them will be held accountable.
Crypto Exploitation Continues to Rise
Recall that in May, blockchain security firm CertiK reported that bad actors looted over $103 million in funds from crypto projects and investors in April 2023, in the form of exploits, exit scams, and flash loan attacks.
Likewise, DefiLlama, claims it Decentralized Finance (DeFi) platforms is lost around $21 million for cybercriminals during February.
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