New York Court Slaps $1mln. Fine & Lifetime Ban On Crypto Fraudster
The New York Eastern District Court has prohibited a cryptocurrency trading firm and its principal from accessing crypto futures market in a case filed by the US Commodities and Futures Trading Commission (CFTC).
The firm in question is Cabbage Tech (Coin Drop Markets) and its founder Patrick K. McDonnell. In the lawsuit, CFTC had alleged that McDonnell and his firms have defrauded clients.
According to Law360, which brought the case to limelight, the US district Judge Jack Weinstein concluded that Cabbage Tech and McDonnell manipulated the Commodity Exchange Act by involving in “egregious intentional violations” of the US federal regulations.
Penalty of $1.10 million
In addition to the permanent ban, the defendants were also slapped with a fine of between $1,161,716 and $871,287, and $290, 429 in restitution.
Judge Weinstein explained that the evidence provided to the court proved beyond doubt that Cabbage Tech and McDonnell were running a fraudulent scheme between January and July last year. One of the facts that were exposed in the investigation is that McDonnell had been projecting Cabbage Tech as a successful firm with multiple offices and a large workforce, but in reality, the entire operation was conducted by the owner himself. Furthermore, the operations were conducted from the home basement in Staten Island, New York.
The scheme was brought to the notice of regulators in June when McDonnell shut down the operations of Coin Drop Markets after posting a message on the firm’s website stating that its server had been hacked. However, the investigations revealed that its server did not face any kind of intrusion and it was the defendant who deliberately closed down operations and stopped communicating with clients.
The CFTC had filed the case against Coin Drop Markets in January this year, alleging that the defendants had assured its clients of providing timely advise, only to steal from them later on.
At that time, director of Enforcement at the CFTC, James McDonald had stated “As alleged, the Defendants here preyed on customers interested in Bitcoin and Litecoin, promising them the opportunity to get the inside scoop on the next new thing and to benefit from the trading acumen of a supposed expert. In reality, as alleged, customers only bought into the Defendants’ fraudulent scheme.”
During the court proceedings, McDonnell defended his position in court, without a lawyer in place. McDonnell had stated that he is not in a position to employ the services of a law firm. The court did try to convince him to have a lawyer, but McDonnell did not heed to the advice.