The charges allege that defendants Randall Crater and Mark Gillespie misappropriated at least $6 million since January 2014 to use "for personal expenses and the purchase of luxury goods." Las Vegas-based My Big Coin Pay, Inc. is also a named defendant.
Specifically, the CFTC alleges that the defendants committed fraud by soliciting customers based on false claims regarding MBC's value, trade status, and usage – even apparently going as far as to say that MBC was backed by gold, which the commission refutes.
As the accused allegedly acquired more than $5 million of the $6 million under scrutiny from within the state of Massachusetts, it was Judge Rya Zobel of the District Court of Massachusetts who issued a freeze of their assets on January 16, 2018.
Moreover, the same order from Judge Zobel also froze assets related to three relief defendants: Kimberly Renee Benge, Barbara Crater Meeks, and Erica Crater, all of whom have been linked to the company and whom allegedly received customer funds "without providing any legitimate services to clients and without any interest or entitlement to such customer funds."
James McDonald, the CFTC Director of Enforcement, stated, "As this case shows, the CFTC is actively policing the virtual currency markets and will vigorously enforce the anti-fraud provisions of the Commodity Exchange Act. In addition to harming customers, fraud in connection with virtual currencies inhibits potentially market-enhancing developments in this area."
Allegations regarding the MBC website, which was operated and maintained by the defendants, include:
"(1) Misrepresenting that MBC was actively being traded on several currency exchanges, including the MBC Exchange website, when in fact it was not.
(2) Misrepresenting in reports the daily trading price, when in fact no price existed because MBC was not trading
(3) Misrepresenting that MBC was backed by gold, when in fact it was not; and
(4) Misrepresenting that MBC had partnered with MasterCard, with the promise that MBC could be used anywhere MasterCard was accepted, when in fact no such partnership existed and MBC could not be used anywhere MasterCard was accepted."
The CFTC alleges that the company and its employees created an elaborate hoax, paying customers with funds obtained from other customers – the classic indicators of a Ponzi scheme.
As MBC customers began to raise more and more questions about the legitimacy of the cryptocurrency, the defendants allegedly attempted to double down by claiming the company had secured a deal with another cryptocurrency exchange that was not named in the CFTC statement. The defendants apparently encouraged customers to wait until the deal went through before redeeming their MBC holdings. It is unclear whether this "new" exchange exists.
The CFTC is seeking, "civil monetary penalties, restitution, rescission, disgorgement of ill-gotten gains, trading and registration bans, and permanent injunctions."
The case is being brought to trial in connection with the Virtual Currency Task Force, a CFTC enforcement division department created to carry the commission's regulatory mandates into the cryptospace.