CFTC Files Fraud Charge Against ‘Blockchain’ Entity That Claims To Grow Customer Funds

The Commodity Futures Trading Commission has filed a complaint in the US District Court for the Middle District of Florida against four individuals and their unincorporated entity, Fundsz. This complaint accuses them of fraudulent solicitation from customers to supposedly trade in cryptocurrencies and precious metals.

According to its website, Fundsz claims to be a decentralized platform that utilizes “revolutionary” blockchain technology that empowers individuals, charities, and institutions to raise recurring and sustainable income. 

Fundsz Makes Up Fictional Weekly Returns For Clients, CFTC Says

In a press release published on August 11, 2023, the CFTC announced that it has charged Rene Larralde of Melbourne, Florida; Juan Pablo Valcarce of West Melbourne, Florida; Brian Early of New Orleans, Louisiana; and Alisha Ann Kingrey of Franklin, Arkansas (operators of Fundsz) for crypto and precious metals fraud.

The CFTC alleged that the defendants – through Fundsz – have been soliciting participants since October 2020 with claims that it has historically generated more than 3% returns per week with a “proprietary algorithm” for trading crypto and precious metals among other things they called their “secret sauce”.

According to the CFTC complaint, they also allegedly claimed to have made timely and accurate payments for seven years. In an effort to convince clients, the defendants asserted that a single $2,500 contribution can be expected to “grow” into $1 million within 48 months, the CFTC said.

The CFTC claims that the solicitation was “successful”, as the defendants reportedly have over 14,000 clients. 

However, the commission found that Fundsz does not trade the received funds, contrary to what customers are led to believe. The defendants allegedly make up and report fictional weekly returns to their clients.

The defendants were also accused of deliberately misrepresenting Fundsz to have a charitable purpose, with the tagline “Fundsz For Your Cause”. This was said to have falsely suggested that contributing to their “unincorporated entity” is a way of providing humanitarian support.

US District Court Sets Date For CFTC’s Motion For Preliminary Injunction

According to the press release, a hearing on the CFTC’s motion for preliminary injunction is set for August 23, 2023. Meanwhile, US District Court Judge Wendy Berger already signed an ex parte statutory restraining order freezing the defendants’ assets.

The commission claims that, in its ongoing litigation, it will pursue restitution for defrauded investors, forfeiture of ill-gotten profits, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA).

The agency’s director of enforcement Ian McGinley reacted to the situation, saying that although the modus operandi of many fraudsters may have changed, the saying “if something sounds too good to be true, it probably is,” remains valid.

He, however, asserted that the CFTC will continue to “root out” bad actors looking to take advantage of participants in the cryptocurrency and precious metals markets.

Crypto total market cap at $1.135 trillion | Source: daily TOTAL chart on TradingView

Featured image from Slaferek Law, chart from TradingView