US govt seeks to stay CFTC action against operators of $44M Bitcoin Ponzi scheme
The United States government is seeking to stay an action taken by the Commodity Futures Trading Commission (CFTC) against the operators of $44 million Bitcoin Ponzi and misappropriation schemes.
On April 19, 2022, the Government submitted a motion to intervene in the civil case and to stay civil proceedings because of the pendency of the parallel criminal case. The same underlying facts are at issue in both the Civil Case and the Criminal Case.
On March 3, 2022, a grand jury in the Eastern District of New York returned an indictment charging the defendants criminally with wire fraud and wire fraud conspiracy, money laundering and money laundering conspiracy, obstruction of justice, conspiracy to obstruct justice, and tampering with evidence.
Specifically, the indictment alleges that the defendants, residents of New York, North Carolina, and Pennsylvania, defrauded investors and potential investors in a series of web-based virtual currency companies called EmpowerCoin, ECoinPlus, and Jet-Coin.
Among other things, investors in the Virtual Currency Companies were promised that their investments would be used to trade Bitcoin and other virtual currencies and that they would be paid large, guaranteed returns from the profits. In truth, the invested assets were used to repay other investors or stolen. Each of the defendants was intimately involved in the operation of the Virtual Currency Companies.
Defendants Golden and Egerton operated EmpowerCoin and ECoinPlus, while Golden and Aggesen operated Jet-Coin. Each of the Virtual Currency Companies made nearly identical representations to investors and relied on similar (or the same) software. The Virtual Currency Companies collapsed in approximately August 2017, and following their collapse defendants Golden and Aggesen obstructed a Federal Trade Commission (FTC) probe into the Virtual Currency Companies by, among other things, wiping Aggesen’s laptop computer.
Investors in each of the Virtual Currency Companies were located in the Eastern District of New York and elsewhere.
Defendants Golden, Aggesen, and Egerton do not oppose the government’s motion for a stay. The government also has consulted with the CFTC, which does not oppose the entry of the requested order to stay the Civil Case.
According to the authorities, a stay of proceedings is appropriate because the government’s motion is timely and the same alleged fraudulent schemes are at issue in both the Civil and Criminal Cases. Moreover, a stay is necessary, the government says, as the defendants should not be permitted to use civil discovery in the Civil Case to avoid the restrictions on criminal discovery that would otherwise pertain to them in the Criminal Case.
A stay is also necessary to promote judicial economy.
Accordingly, the United States requests that the Court: (1) permit the government to intervene pursuant to Federal Rule of Civil Procedure 24; and (2) order, pursuant to the Court’s inherent power, that proceedings in the Civil Case be stayed until the conclusion of the related Criminal Case.