CFTC Chair Warns Crypto Industry: Fraud Will Be Pursued Aggressively

Acting chair of the Commodity Futures Trading Commission (CFTC), Caroline Pham, delivered a stern warning to the crypto industry during the Coinbase Annual Summit. She emphasized that the Trump administration’s pro-growth stance does not equate to leniency towards illegal activities such as fraud, deception, and theft. Pham made it clear that regulators will continue to aggressively pursue such activities, even in a more favorable regulatory environment. She also criticized the Biden administration’s approach of “regulation by enforcement,” stating that it had unintended consequences on broader financial markets, including traditional derivatives and forex. Pham argued that the previous administration’s attempts to stretch legal definitions to target crypto disrupted the foundational rules of global markets.

Pham also shared her vision of integrating crypto into everyday life, likening it to how Uber transformed the transportation sector. She believes that making digital assets so integral to daily life will make them politically untenable to remove or criminalize. Her remarks came shortly after the House Financial Services Committee advanced the CLARITY Act, which aims to resolve the regulatory tug-of-war between the CFTC and the SEC by assigning clearer authority over digital assets. This legislation, if passed, would likely give the CFTC more oversight power over the crypto industry.

Pham announced her upcoming departure from the CFTC, with Brian Quintenz, the current policy head at a16z Crypto, expected to succeed her pending Senate approval. However, Quintenz faced criticism during his nomination hearing for evading questions about maintaining political balance at the CFTC. Senators Tina Smith and Raphael Warnock expressed concern over the potential for a politically unbalanced leadership at the agency. The law mandates that no more than three CFTC commissioners may belong to the same political party, and at the time of the hearing, only two commissioners were active—acting chair Caroline Pham and Kristin Johnson—both of whom are expected to leave if Quintenz is confirmed. Quintenz’s nomination remains uncertain due to lingering concerns over political balance and financial entanglements.

In other CFTC-related news, a Massachusetts federal court issued a default judgment against the alleged operators of My Big Coin (MBC), ordering them to pay approximately $25.8 million in penalties and restitution in connection with a fraudulent crypto scheme. The CFTC announced the ruling, stating that My Big Coin Pay, Inc., My Big Coin, Inc., and their executives, Mark Gillespie and John Roche, were found liable for defrauding investors through a digital currency scam that operated between 2014 and 2017. The court ordered the defendants to pay $19.32 million in civil monetary penalties, as well as $6.44 million in restitution to the 28 investors they allegedly defrauded. Gillespie and Roche, along with their associated companies, were also permanently banned from participating in markets under CFTC oversight or engaging in any CFTC-regulated activities.

The CFTC explained that the My Big Coin scheme relied on deceptive marketing practices to solicit funds from unsuspecting investors. The defendants made numerous false claims about the cryptocurrency’s value, use cases, and tradability. They also misled investors by saying that MBC was backed by gold, which was not true. These fraudulent claims helped the group raise over $6 million from investors across the United States. The CFTC warned that while the judgment secures financial penalties and investor restitution, there is no guarantee that victims will be able to recover their funds, as the defendants may lack sufficient assets to cover the full amount of restitution. Another individual involved in the scheme, Randall Crater, was previously convicted on multiple charges, including wire fraud and operating an unlicensed money-transmitting business. Crater was sentenced in early 2023 to more than eight years in prison and ordered to repay $7.6 million to investors. His appeal for a new trial was denied in February of 2024. The court dropped its case against one alleged participant, Michael Kruger, due to his death.