My Big Coin: US regulators file charges against the creators of $6m cryptocurrency Ponzi scheme

US regulators have filed charges against the creators of My Big Coin, an alleged cryptocurrency Ponzi scheme that cost unsuspecting customers $6m (£4.2m). In a case filed in federal court in Boston on 16 January and unsealed on Wednesday (24 January), the Commodity Futures Trading Commission (CFTC) has accused Randall Crater, Mark Gillespie and My Big Coin Pay, Inc of commodity fraud and misappropriation of funds raised for the virtual currency dubbed "My Big Coin" (MBC).

Crater is the founder of the My Big Coin Pay Inc., while Gillespie has been accused of soliciting customers on behalf of the Las Vegas-based company.

Between at least January 2014 and January 2018, Crater and Gillespie lured customers from across the US by "making false and misleading claims and omissions about MBC's value, usage and trade status and that MBC was backed by gold".

According to the CFTC, the defendants also operated a website for the fictional cryptocurrency that featured multiple false and misleading claims such as misrepresenting that MBC was actively being traded on several currency exchanges when it was not. The site also detailed the daily trading price for the coin that did not exist.

The duo also falsely claimed that MBC was backed by gold and was partnering with MasterCard.

"In reality, as alleged, the supposed trading results were illusory, and any payouts to customers were derived from funds fraudulently obtained from other customers in the manner of a Ponzi scheme," the CTC said in a statement.

When customers grew and began asking questions about their MBC accounts, the defendants tried to cover up the fraud by issuing additional coins to customers claiming they had secured a deal with another exchange to trade MBC, the complaint states. They also encouraged the customers not to redeem their MBC holdings until the "cryptocurrency" was active on the "new" exchange.

As per the complaint, the duo misappropriated virtually all of the $6m solicited from customers, transferred it into personal bank accounts and used it for personal expenses and luxury goods including buying "a home, antiques, fine art, jewelry, furniture, interior decorating and other home improvement services, travel and entertainment".

A federal judge has issued a temporary restraining order freezing the defendants' assets.

"As this case shows, the CFTC is actively policing the virtual currency markets and will vigorously enforce the anti-fraud provisions of the Commodity Exchange Act," CFTC Director of Enforcement James McDonald said.

Last week, the CFTC filed fraud charges against three other digital currency companies. The charges come as governments around the world increasingly look to regulate cryptocurrency trade and exchanges amid the hype surrounding digital currencies due to the potential risks they pose to customers and financial systems.

"In addition to harming customers, fraud in connection with virtual currencies inhibits potentially market-enhancing developments in this area. We caution potential virtual currency customers, once again, that they should engage in appropriate diligence before purchasing virtual currencies," McDonald said.