The United States Commodities Futures Trading Commission (CFTC) has received a default judgment from a Texas federal court ruling in favor of the regulator’s case against Diamonds Trading Investment House. The company is accused of operating a fraudulent foreign exchange platform and impersonating the CFTC.
The ruling was made after Diamonds Trading Investment House failing to respond to the charges, and as such little is known of location and identity of the defendants. The court has ordered the defendants to pay nearly $400,000 in combined civil penalties and restitution. The judgment was filed by Judge Reed C. O’Connor of the U.S. District Court for the Northern District of Texas.
Defendants Use Facebook and Email to Promote Fraudulent Investment Scheme
The CFTC's complaint was originally filed against defendants John Doe 1 also known as (a.k.a) Morgan Hunt doing business as (d.n.a.) Diamonds Trading Investment House, and John Doe 2 a.k.a. Kim Hecroft d.n.a. First Options Trading on Sep. 28, 2018. Hecroft is purportedly of Baltimore, Maryland, while Hunt is purportedly of Arlington, Texas. The regulator attempted to serve the complaint via email, before filing a court order with Texas court after receiving no response from the defendants.
The defendants promoted fraudulent investment schemes involving cryptocurrencies, leveraged foreign currency contracts, binary options, and diamonds. Hunt and Hecroft falsely promised “a passive investment return of 40-60% after a 30 day trading cycle,” and were successful in scamming at least two people - one of whom received a disability pension. The CFTC stated:
The Defendants used Facebook and email to fraudulently solicit Bitcoin from members of the public, falsely claimed that they would use customer funds to invest in trading for the benefit of the customers, misrepresented their experience and track record as traders and portfolio managers, falsely told customers that they could not withdraw their purported investment profits without first paying a tax to the CFTC, and misappropriated customer funds.
Defendants Fined $180,000 Plus Restitution
Hunt and Hecroft were also found to have impersonated a CFTC investigator, forged documents ostensibly authored by the CFTC’s General Counsel, and provided fake account statements to their victims. Hecroft also produced a pretend “Certified CryptoCurrency Expert” license that he purported was issued by the Blockchain Council.
James McDonald, CFTC Director of Enforcement, stated: “As the CFTC has repeatedly warned, retail customers should exercise caution before buying or trading cryptocurrencies on unfamiliar Internet websites or social media. The CFTC reiterates that it does not collect taxes or fees, and will continue to educate the investing public and aggressively pursue misconduct in this arena.”
The court order requires both Hunt and Hecroft to pay restitution and a $180,000 civil monetary penalty each and imposes permanent registration and trading bans on the defendants.