The Commodity Futures Trading Commission (CFTC) has announced a default judgment regarding the case of Mosaic Exchange Ltd. and its owner and Chief Executive Officer Sean Michael, of Miami, Florida. The CFTC initiated the enforcement action alleging a fraudulent digital asset commodity scheme.
The order is based on a complaint filed on September 26, 2023, charging the defendants in connection with a fraudulent digital asset solicitation and trading scheme and misappropriation.
The default judgment finds Mosaic and Michael liable for all violations of CFTC regulations alleged in the complaint, including that they fraudulently solicited 18 individuals in the US and other countries claiming the service of trading of Bitcoin and other digital assetss while misappropriating customer funds.
The default judgment order requires them to pay approximately $468,600 in restitution, $60,980 in disgorgement, and a $660,000 civil monetary penalty.
The order also permanently enjoins them from engaging in conduct that violates the CEA, as charged, and permanently bans them from registering with the CFTC and from trading in any CFTC-regulated markets.
The order finds that from about February 2019 to June 2021, the defendants solicited and induced customers into transferring Bitcoin and other funds to Mosaic by claiming that Mosaic had tens of millions of dollars in assets under management, had historically earned specific monthly profits, and broker agreements with certain crypto exchanges.
The CFTC said that Mosaic did not have the assets under management as represented and did not generate win rates as described. In addition, Michael, who was Mosaic’s sole owner, principal, CEO, and control person, used some customer funds to pay for personal expenditures such as travel, dining at restaurants, and other personal purposes.