Cryptocurrency trader Joseph Kim has been sentenced by the US Department of Justice to 15 months in prison, and the Commodities Futures Trading Commission (CFTC) has ordered Kim to pay USD 1.146 million of restitution after the rogue trader was found to have committed trading-related fraud from September 2017 through March 2018, which resulted in total losses of USD 1.146 million. Further, Kim has been banned from trading for the rest of his life.
In September 2017, Kim was working at a cryptocurrency trading firm based in Chicago and began sending the firm’s Bitcoins and Litecoins to his own wallet. The firm approached Kim and asked him about the missing money, and he asserted that the cryptocurrency exchange was having problems, and Kim had to transfer to other accounts for security purposes. The ruse only held up for two months and Kim was fired in November 2017 after stealing USD 601,000 from the firm.
Kim then solicited funds from clients, without notifying them that he was fired from the firm. Kim made it seem like he was trying to start his own business. Five clients invested USD 545,000, with Kim promising the money would go towards a low-risk arbitrage scheme. However, Kim made high-risk bets on directional cryptocurrency price movements, during a time when the cryptocurrency markets were crashing. Kim ultimately lost all of the money but issued false statements to customers showing profits.
The arrest and prosecution of Kim was a joint effort by the CFTC, Federal Bureau of Investigations (FBI), Department of Justice, and the Securities and Futures Commission of Hong Kong.
The Director of Enforcement at the CFTC, James McDonald, said, “Today’s Order stands as yet another in the string of cases showing the CFTC’s commitment to actively police the virtual currency markets and protect the public interest. In addition, the criminal indictment and sentence reaffirms the CFTC’s commitment to working in parallel with our partners at the Department of Justice to root out misconduct in these markets. My thanks to US Attorney Lausch and his staff, as well as the Federal Bureau of Investigation, for their assistance in this case.”
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