Patrick McDonnell, the man behind the CabbageTech company that allegedly scammed investors out of their BTC in exchange for trading advice, may be forced to pay a hefty sum in penalties after the CFTC caught on to him and initiated a suit.
Last Friday, the regulator sued the rogue company after it had shut down all of its websites and social media presence after receiving 62 transactions in cryptocurrency. The terms of the lawsuit included restitution to defrauded investors and monetary penalties.
Although the CFTC is looking to impose a penalty of $1,372,180.62, this isn’t the maximum that the court could issue. According to the organization’s inflation-adjusted penalty tables, Section 6c of the Commodity Exchange Act (Prohibited Transactions) could allow the federal district court to impose a fine of $177,501 for each fraudulent transaction.
This amounts to $11,005,062 for the 62 transactions that CabbageTech received through its lifetime.
“This action is among the latest examples of the CFTC’s continuing commitment to act aggressively and assertively to root out fraud and bad actors involved in virtual currencies. As alleged, the defendants here preyed on customers interested in Bitcoin and Litecoin, promising them the opportunity to get the inside scoop on the next new thing and to benefit from the trading acumen of a supposed expert,” said James McDonald, director of enforcement at the CFTC.
It’s unlikely that the CFTC will pursue the highest penalty, as the focus here appears to be restitution to defrauded investors.
We still don’t know the size of this particular cryptocurrency scam, but considering the penalties the CFTC is looking for, we suspect that the actual sums involved are at most in the millions of dollars.
This contrasts starkly with the cryptocurrency-related scam in Vietnam that lost investors more than half a billion dollars and prompted the government there to take a stronger stance on digital coins.
