In brief
- Reynolds scammed almost 170 US citizens.
- He promised to trade their crypto using algorithmic traders and return it with a guaranteed profit.
- He has since disappeared.
On Friday, the US Commodity Futures Trading Commission released a statement demanding that British citizen Benjamin Reynolds pay a penalty of $571 million for a scam he ran throughout the summer and autumn of 2017.
The bulk of the penalty is a $429 million fine, with the additional $142 million to be paid as restitution to his victims.
20,000 Bitcoin is a lot of money. Today, with Bitcoin hovering around $55k it comes to over a billion dollars. Back at the start of summer 2017 when Reynolds began his scam, the price of Bitcoin was around $1,500, or just under a thirty-sixth of its value today.
Purportedly from Manchester, north England, Reynolds targeted around 170 US citizens through a make-believe company called Control-Finance. Using a website, various social media profiles and email communications Reynolds baited them with the mendacious promise that he’d trade their funds on online crypto markets and return a profit to them.
He constructed an elaborate lie, telling victims that he’d use "specialized virtual currency traders who generated guaranteed trading profits,” according to the statement by the CFTC.
He promptly disappeared with the digital loot and hasn’t been found since, though the CFTC sued him in January 2019.
Crypto: fertile ground for cyber attacks.
With the advent of cryptocurrencies, new forms of theft have appeared thick and fast. In February this year, decentralized finance (DeFi) platform C.R.E.A.M was robbed of $37 million when hackers used a complex multi-stepped exploit involving flash loans.
Then in March, a compromised wallet on social money platform Roll was drained of its contents, which were dumped for 3000 ETH, or about $5.7 million at the time, sending the price of many of the tokens that were stolen into freefall.
With the advent of new forms of cybercrime comes new forms of digital heroism too. Last year, blockchain security expert ‘samczsun’ spotted a vulnerable smart contract that left 25,000 ETH, or $9.6 million at the time, out in the open. He surreptitiously secured the pot and alerted its rightful owner, Lien Finance.
So, the question remains, will Benjamin Reynolds feel the penitent sting of a healthy conscience? Will he pay his fine with the CFTC? Even if he bit the bullet, he’d still have half a billion in Bitcoin left over for his undoubtedly philanthropic designs.