CFTC Uncovers Ponzi Scheme in My Big Coin Pay Cryptocurrency

U.S. regulators have stepped up their surveillance of crypto fraud by filing formal complaints against My Big Coin Pay, a digital currency that funneled millions of dollars to the operators in an apparent Ponzi scheme.

Formal Complaints Filed

The Commodity Futures Trading Commission (CFTC) has lodged complaints against Randall Crater and Mark Gillespie, who allegedly used funds generated from the My Big Coin Pay ICO to purchase real estate, jewelry and vacations. Regulators said a total of $6 million was “misappropriated” and used to buy indulgences. In an attempt to cover up the Ponzi scheme, the cryptocurrency’s operators tried to issue additional tokens.

The U.S. commodities regulator filed the case on Jan. 16, citing misappropriation charges that include “transferring customer funds into personal bank accounts, and using those funds for personal expenses and the purchase of luxury goods.”

According to the CFTC filing, the operators of the cryptocurrency made several misleading claims to lure unsuspecting investors. This included false claims that the cryptocurrency was actively traded on the major exchanges, and that it had daily price quotes. The scam coin’s operators also said they were supported by major companies like MasterCard. None of these assertions were true.

Regulators described My Big Coin Pay’s results as “illusionary,” and said the setup took money from investors fraudulently.

Regulators Step Up Oversight Efforts

The CFTC is one of two main U.S. regulatory bodies tackling the growing and often mischievous world of cryptocurrency. The Securities and Exchange Commission (SEC) is also scrutinizing token sales for possible violation of federal securities laws. Several funds have shelved plans for bitcoin ETFs on grounds that the SEC would not approve the application.

As one might expect, the CFTC is handling several cases of fraud involving cryptocurrency. Just last week, it filed fraud charges against three other crypto operators, according to Engadget, a technology news portal.

The commodities regulator is also facing criticism for allowing the CME and CBOE exchanges to launch bitcoin futures. Opponents of the move, which include the Futures Industry Association (FIA), say bitcoin futures may introduce unwanted complications to the clearing process.

Meanwhile, fraudsters have permeated every corner of the ICO market in hope of stealing a slice of an ever expanding pie. Coin offerings are generating record inflows at the moment, with startups easily raising tens of millions of dollars on the back of a whitepaper and PR campaign. Although the market is scrutinizing ICO projects much more closely, huge appetite remains. Some companies are said to be rushing their crowdsale while the regulatory climate is still favorable.

On the other side of the token raise, hackers are stealing hundreds of millions of dollars from ICOs, according to new research by big-five consulting firm Ernst & Young.  The researchers concluded that nearly $400 million in ICO funds raised last year were stolen through phishing and other common tactics.

The report indicated that “flawed token valuations, unclear regulations, heightened hacker attention and congested networks” were the biggest catalysts behind the widespread security breaches. Clearly, this is one corner of the financial market regulators will need to monitor much more closely.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 


Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi