The United States Commodity Futures Trading Commission (CFTC) is getting closer to the end of a lawsuit targeting fraudulent Bitcoin scheme Control-Finance and its principal Benjamin Reynolds.

Let’s recall that, in June 2019, the CFTC announced the filing of a civil enforcement action in the New York Southern District Court against Control-Finance, a purported Bitcoin trading and investment company, and its principal, Benjamin Reynolds, both of the United Kingdom. The Complaint charges the defendants with exploiting public enthusiasm for Bitcoin by fraudulently obtaining and misappropriating at least 22,858.822 Bitcoin (worth at least $147 million at the time) from more than 1,000 customers.

Earlier this week, the Court issued an order which indicates that the end of this case is near. The order gives Reynolds a deadline to show a cause why a default judgment should not be entered against him.

Within fourteen days of the date of the Order (that is, November 24, 2020), the Commission will have to serve a copy of the Order, together with the Commission’s Motion and all supporting papers, on Reynolds by mailing copies of the foregoing documents to his last known address, and file proof of service with the Court. The Commission will also cause to be published in The Daily Telegraph for two consecutive weeks a copy of the Order to Show Cause and a statement describing how a copy of the Complaint and other filings in this action may be obtained. Publication should occur no later than January 5, 2021.

Within fourteen days of service of a copy of the Order by publication or personal service, Reynolds is required to show cause why the Court should not enter default judgment against him by filing a documents on the docket for this case.

Let’s explain that the entry of default judgment would entail heavy financial consequences for the defendants. According to the proposed default judgment:

• Reynolds will have to pay restitution in the amount of $142,986,589.
• Also, he will have to pay a civil monetary penalty in the amount of $429,000,000 ($429 million).

The CFTC Complaint alleges that since at least May 1 through October 31, 2017, the defendants used a website and accounts at popular social media sites to fraudulently solicit customers to purchase and transfer Bitcoin to them. The defendants induced customers into transferring Bitcoin to them by falsely representing that they employed expert virtual currency traders who earned guaranteed daily trading profits on all Bitcoin deposits.

The defendants made numerous material misrepresentations and omissions, including that they (1) earned customers 1.5 % in daily Bitcoin trading profits and up to 45% per month; (2) used risk diversification methods to protect customers’ Bitcoin deposits; and (3) provided a “safe haven” from Bitcoin market risks. In reality, the defendants made no trades on customers’ behalf, earned no trading profits for them, and misappropriated their Bitcoin deposits.

The defendants concealed their fraud by providing customers with sham account balances and profit figures that falsely reflected trading profits that did not exist. They also created fabricated weekly Trade Reports, which identified illusory, purportedly profitable virtual currency trades that Defendants never placed.