U.S. commodities regulators said Thursday they have charged a California resident and his business with allegedly defrauding investors out of more than $1.3 million in funds intended to go to digital-asset commodity and foreign-exchange trading.
The civil enforcement action was filed in the U.S. District Court for the Central District of California against Cunwen Zhu and his company, Justby International Auctions, the Commodity Futures Trading Commission said.
The CFTC said it was its first case involving a scam known as “pig butchering,” which is growing in popularity, it said. The authorities did not specify which digital-asset commodities were involved, but by commonly seen definitions they include cryptocurrencies and non-fungible tokens.
In the scheme, “fraudsters cultivate a friendly or romantic relationship with a potential customer, ‘fatten’ them up with falsehoods, before soliciting the customer to participate in a fraudulent financial opportunity,” the CFTC said.
“As people sought to escape the isolation of the pandemic and form a connection to others online, fraudsters saw a new venue to prey on and to take advantage of the public,” the CFTC’s director of enforcement Ian McGinley said in a statement.
Zhu and Justby allegedly accepted and misappropriated more than $1.3 million from at least 29 customers from about April 2021 through March 2022, the CFTC said, using some of the money for personal use and transferring most to other accounts.
No actual trading took place, the CFTC alleged. The agency is seeking restitution to customers, civil penalties, trading bans and other redress, it said.
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