$147 000 000 USD
DESCRIPTION OF EVENTS
"Control Finance was an investment [company]." "Control Finance provide[d] no information on their website about who owns or runs the business", however "[e]very Control Finance members [apparently] knew that the company was created in United Kingdom by someone who claim to be called Benjamin Reynolds." "UK Companies House incorporation documents are provided on the Control Finance website, showing an incorporation date of September 8th, 2016." "The Control Finance corporate address provided belongs to Bruntwood, who sell virtual office space. As such it appears Control Finance exists in the UK in name only." "The sole Director of the company is Benjamin Reynolds, who is also the listed owner of the Control Finance website domain (registered September 6th, 2016)."
"The fraudulent scheme operated between May and September 2017, advertising profits from a trading pool that never actually generated any returns." "Control Finance marketing videos on the company website feature a speaker with a distinct Eastern European accent. In the videos the speaker reads marketing copy present on the Control Finance website." "Control Finance has no retailable products or services, with affiliates only able to market Control Finance affiliate membership itself." "In order to extract bitcoin from investors, Control-Finance lured them with promises of guaranteed 1.5 percent a day, or 45 percent a month, which they described in weekly fabricated trade reports."
"Control Finance disappeared with approximately $120.000.000 on September 7, 2017. At least that was the date by when the members stopped receiving payments allegedly due to a DDoS attack." "While Reynolds represented that he would return all bitcoin deposits to customers of Control-Finance by late October 2017, he never did and instead retained the deposits for his own personal use. Customers lost most or all of their bitcoin deposits as a result of the scheme." "[T]he fictional CEO obtained and misappropriated more than 22,800 bitcoin (worth more than $1.24 billion) from more than 1,000 customers." "Authorities said the man lured in at least 1,000 investors, over 100 of whom were U.S. citizens to invest in its bogus BTC products. The CFTC said Reynolds made away with 22,858 BTC which at the time was worth $147 million. This stash is currently worth $1.3 billion."
"Reynolds falsely represented to customers that Control-Finance traded their bitcoin deposits in virtual currency markets and employed specialized virtual currency traders who generated guaranteed trading profits for all customers." "In fact, Reynolds made no trades on customers’ behalf, earned no trading profits for them, and paid them no referral rewards or bonuses." "Investigators said Reynolds initially operated Control-Finance like a Ponzi scheme, paying off existing investors with money he collected from the new investors. The model, however, proved unsustainable as new clients dried up, which resulted in Reynolds closing shop and vanishing with his investors’ funds, according to authorities." "After he fled, the CFTC began tracking him to serve him, to no avail. It hired U.K solicitors to serve Reynold at the address he had listed on his site but he no longer lived there. Attempts to serve him via email and phone also failed."
"On June 18,2019, the US Commodity Futures Trading Commission (CFTC) announced it had initiated a civil enforcement action against a now-defunct cryptocurrency trading and investment company for misappropriating $147 million worth of Bitcoin." "The US Commodity Futures Trading Commission accuses Reynolds of running a pyramid scheme" "The Complaint charges the defendants—Control-Finance Limited and its principal, Benjamin Reynolds—with exploiting public enthusiasm for crypto assets by fraudulently obtaining and misappropriating at least 22,858.822 Bitcoin from more than 1,000 customers through a classic (HYIP) Ponzi scheme called the Control-Finance Affiliate Program." "A federal court in the United States has ordered [Reynolds] to pay $572 million in restitution and civil monetary penalties[.]" "The court found that the Manchester, England native “operated a fraudulent scheme to solicit bitcoin from members of the public and misappropriated customers’ bitcoin.”"
"The court ruled that Reynolds must pay $143 million in restitution to the customers he defrauded. He must also pay $429 million in civil monetary penalty. The order also permanently enjoins him from engaging in conduct that violates CFTC regulations or trading in any CFTC-regulated markets."
"[T]he CFTC didn’t seem to know exactly where Reynolds was, saying in a press statement that he was “purportedly” living in Manchester, England." "The judgement was issued by Mary Kay Vyskocil, a judge in the US District Court for the Southern District of New York. Vyskocil wrote that Reynolds had “failed to appear or answer the Complaint.”"
"While the default judgment marks a victory for the CFTC, there’s no guarantee that the victims will get refunded, the watchdog cautioned. “The CFTC cautions victims that restitution orders may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure wrongdoers are held accountable,” it stated."
"The CFTC’s case relied on UK Companies House data which, not surprisingly, turned out to be fraudulent." In 2020, "[t]he CFTC has dropped their case against Control Finance. On April 6th the court accepted the FTC’s motion to voluntarily dismiss Control Finance as a defendant. Emphasizing the absurdity of the case, Control Finance’s fictional CEO Benjamin Reynolds is still an active defendant. Following his failure to respond to the case, the court clerk recorded an entry of default against Reynolds on April 6th. Given the CFTC has been thus far unable to trace who ran Control Finance, to what end pursuing default judgment against Reynolds benefits anyone is unclear."
"Control Finance CEO Benjamin Reynolds [was allegedly] outed as Estonian resident Karl-Joonatan Mets." "Karl-Joonatan Mets is a young man from and living in Estonia. Over the last decade he’s made a name for himself as a stand-up comedian and poker player." "The last video on Mets’ channel is dated July 12th, right about the time Control Finance launched."
"Based on information provided to BehindMLM after publication of th[at] article, [they now] believe Karl-Joonatan Mets was innocently hired by an Estonian/Russian production agency."
"Based on BehindMLM’s own research, we have concluded that this production agency was working with and continues to work on behalf of Russian scammers." "Mets professes his innocence, which fits with typically Russian scammers hiring actors to front their scams." "The video was shot in a rented office set with Control Finance branding. Mets played an office worker." "He read a script talking about company updates and other related marketing points. The script didn’t call of Mets to identify himself as Benjamin Reynolds." "Mets was paid €750 EUR for his work, with more videos to come."
Control Finance was a multi-level ponzi scheme which was operated by a fictional Benjamin Reynolds. As in a typical ponzi, this scheme used the funds of new investors to pay out old investors. It claimed that the invested funds were being used to perform intelligent trades, which is a common ponzi scheme claim.
Investors were given no visibility into the backing of funds or the identity of the scheme owners, and the scheme collapsed with their funds. It is unlikely that affected users will get any funds back, since the actual operators of the scheme are unknown.
HOW COULD THIS HAVE BEEN PREVENTED?
Greater education for the public would be of huge benefit. There has yet to be found any algorithm which can consistently beat the market, and if such were found, the market would reflect the price fairly quickly.
Were the industry able to be regulated in a lightweight manner, it would ensure that investors would be able to participate above-ground, where identities could be known and the backing of funds could be validated. When there are large barriers to fundraise or participate in investing, it creates an opportunity for underground activity, which leads to many investors expecting this.
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CFTC Hits Mastermind of Control-Finance Scam with $570M Fine (Aug 9)
Control Finance is down, $120 million vanishes as company closes website and all social media. : Bitcoin (Aug 9)
US court orders UK man behind Control-Finance scam to pay $572M - CoinGeek (Aug 9)
Federal Court Judge orders Benjamin Reynolds Control-Finance Ltd. to pay $571 million for Bitcoin fraud of 1000 people including 169 in U.S. - Newman & Shapiro (Aug 9)
Owner of bitcoin trading scheme Control-Finance ordered to pay $572 million (Aug 9)
Federal Court Orders UK Man to Pay More Than $571 Million for Operating Fraudulent Bitcoin Trading Scheme | CFTC (Aug 9)
CFTC abandons fraud case against Control Finance (Aug 9)
Control Finance's Benjamin Reynolds is Karl-Joonatan Mets (Aug 9)
How Control Finance scammers duped Karl-Joonatan Mets (Aug 9)