CFTC's First Crypto Fraud Case Under Pham: $1.5M Scheme

The US Commodity Futures Trading Commission (CFTC) has taken a significant step in its enforcement efforts against cryptocurrency fraud. In a recent announcement, the CFTC charged a New York resident, Rashawn Russell, with engaging in a digital assets trading scheme that defrauded investors. This marks one of the agency's first crypto-related enforcement actions under acting Chair Caroline Pham.

The CFTC's complaint, filed on Jan. 16, alleges that Russell solicited investors to contribute cryptocurrency to a fraudulent fund between 2020 and 2022. He guaranteed no loss to investors and even promised a minimum 25% return in some instances. However, the complaint states that Russell intentionally or recklessly made false or misleading statements to solicit and retain investors. The scheme resulted in the misappropriation of roughly $1.5 million, leading to Russell's guilty plea to wire fraud in the US District Court for the Eastern District of New York.

This enforcement case comes as the CFTC is restructuring its Division of Enforcement's priorities. Acting Chair Pham announced on Feb. 4 that the commission would divide responsibilities for enforcement cases into two task forces focused on retail fraud and "complex fraud and manipulation." This shift in priorities suggests that the CFTC will be more proactive in addressing fraudulent activities within the cryptocurrency market.

During the 2024 fiscal year under former Chair Rostin Behnam, the CFTC reported more than $17 billion in monetary relief, primarily stemming from actions against crypto exchange FTX. Pham's announcement indicates that the CFTC may focus less on regulating by enforcement for crypto firms handling digital assets considered commodities.

Meanwhile, the US Securities and Exchange Commission (SEC) has also taken steps to address the regulatory landscape for digital assets. In January, the SEC announced the formation of a crypto task force to develop a regulatory framework. Acting SEC Chair Mark Uyeda, appointed by US President Donald Trump, will lead the commission until the US Senate can consider the nomination of former commissioner Paul Atkins.