A federal court in Florida has recently ruled that Mosaic Exchange Ltd. and its CEO Sean Michael must pay over $1.1 million in penalties and restitution for running a deceitful digital asset trading scheme that targeted investors in multiple countries.
The final default judgments were issued by the U.S. District Court for the Southern District of Florida, concluding a case that began with the Commodity Futures Trading Commission’s (CFTC) complaint in September 2023 against the company based in Pennsylvania and its executive in Miami.
The court found Mosaic and Michael guilty of breaching the Commodity Exchange Act through a complex deception that lasted from February 2019 to June 2021. The scheme enticed 18 investors with false statements about the company’s assets under management, trading performance, and partnerships with cryptocurrency exchanges.
The financial penalties include around $468,600 in restitution to the deceived customers, $60,980 in disgorgement of unlawfully obtained profits, and a $660,000 civil penalty.
According to the CFTC, “The order also permanently prohibits them from engaging in activities that violate the CEA, as charged, and permanently prohibits them from registering with the CFTC and trading in any CFTC-regulated markets.”
Mosaic Exchange Ltd. and CEO Ordered to Pay Over $1.1 Million for Fraudulent Digital Asset Commodity Scheme: https://t.co/6U3yPBg4ms
— CFTC (@CFTC) January 13, 2025
Court documents reveal that Mosaic falsely claimed to have tens of millions in managed assets and boasted about their proprietary algorithm achieving an 82% accuracy rate. The company advertised monthly returns ranging from 20% to 60%, but investigations discovered that these figures were based on projections rather than actual results.
“However, the order finds Mosaic did not have the assets under management as represented; Mosaic did not generate win rates as represented but rather hypothetical projections — i.e., not actual trading,” stated the CFTC in its official release.
CFTC vs. Crypto
The CFTC has been actively involved in cryptocurrency regulation, issuing several statements and updates in recent times.
In a recent development, Gemini Trust Company, a cryptocurrency exchange founded by Cameron and Tyler Winklevoss, settled for $5 million with the CFTC. The settlement resolves allegations that Gemini provided misleading information to regulators while seeking approval for a Bitcoin futures contract.
Another case involved a federal court ordering five individuals associated with Icomtech to pay more than $5 million in penalties for executing a fraudulent digital asset scheme. These individuals solicited over $1 million from 190 investors between August 2018 and December 2019, promising daily returns of up to 2.8% through Bitcoin and other cryptocurrency trading.
Furthermore, in December, the CFTC charged a Washington state pastor with orchestrating a $5.9 million cryptocurrency fraud scheme. The commission stated that the scam primarily targeted Spanish-speaking members of the pastor’s congregation, offering substantial returns but ultimately defrauding participants.