In two separate legal actions, a US citizen has been sentenced to 15 months in jail and fined in excess of $1.1 million for fraud and embezzlement, according to a statement issued by the US Commodity Futures Trading Commission (CFTC) on November 9.
Preliminary court documents claim that between September and November of last year, Arizona resident Joseph Kim embezzled approximately 980 Litecoin and 339 bitcoin from his employer in an effort to cover personal losses connected to trading in cryptocurrency. Kim's actions reportedly cost his employer about $601,000.
When questioned by his employer about the missing digital currency, Kim claimed that due to security issues connected with cryptocurrency exchanges, he was forced to deposit the stolen virtual currency into his digital wallet, and even told his employer that the missing Litecoin was deposited into a company-owned digital wallet.
As per the court documents, Kim was terminated from his position in November of last year, but his fraudulent actions continued.
In an apparent attempt to pay back what he stole, from December 2017 to March 2018 Kim raised approximately $545,000 from at least five different individuals who were interested in investing in cryptocurrency
Kim told the investors he had voluntarily left his prior position because he wanted to start his own crypto trading firm. Moreover, Kim told these investors he would invest the funds they sent him in "an arbitrage virtual currency strategy" with a lower risk of loss. In actuality, he "made high-risk, directional bets on the movement of virtual currencies" that resulted in the loss of the entire $545,000.
The press release also states that Kim submitted an offer of settlement, which the commission accepted. Pursuant to his acceptance, Kim pled guilty to violating 6(c)(1) of the Commodity Exchange Act and 17 C.F.R. § 180.1(a), allegations that he committed wire fraud when embezzling the $601,000 worth of bitcoin and Litecoin from his employer. He was subsequently ordered to pay restitution in the amount of $1,146,000 and is permanently banned from trading virtual currency or soliciting funds from investors. Kim was also sentenced on November 9, 2018, on related criminal charges filed in the US District Court for the Northern District of Illinois.
The director of enforcement for the CFTC, James McDonald, stated, "Today's Order stands as yet another in the string of cases showing the CFTC's commitment to actively police the virtual currency markets and protect the public interest."
The CFTC has been actively pursuing fraudulent actors in the cryptosphere for some time now. In January of this year, it announced it had filed fraud and misappropriation charges against three different digital currency operators. In June, it issued subpoenas to cryptocurrency exchanges Bitstamp, Coinbase, itBit, and Kraken over suspicions of market manipulation. Additionally, in September, the CFTC brought My Big Coin founder Randall Crater to court over allegations of fraudulent fundraising activities.