CFTC Hits Mosaic Exchange with $1.1M Penalty Over Fraudulent Digital Asset Scheme

Mosaic Exchange Ltd., an LLC company based in Pennsylvania, and its CEO Sean Michael have been sanctioned to pay over $1.1million to the commission and penalties and to resign from the license after engaging themselves in a fraudulent digital asset commodity scheme as was determined by the U.S. District Court of Florida. 

According to the press release, the verdict was made by the Commodity Futures Trading Commission (CFTC), in response to a complaint filed as early as September of 2023 that accused the company of using deceitful strategies to lure investors.

Mosaic’s Fraudulent Practices

Between February 2019 and June 2021, the firm Mosaic and Michael took money from 18 investors, in the United States and abroad, by lying about where the money would go. They said it controlled tens of millions in assets, hit specific monthly profits with efficient trading algorithms, and partnered with cryptocurrency exchanges. 

But the court said such claims were a complete work of fiction. Mosaic had little control over assets, and the increases in trading coaching were more theoretical rather than realistic. Also, the customers’ funds were embezzled, and some were spent on personal lifestyles such as expenses for travel, meals, etc.

The default judgment of the court includes ordering Mosaic and Michael to jointly contribute approximately $468,600 for restitution to defrauded consumers, $60,980 for disgorgement of gains from the fraud, and a civil penalty of $660,000. 

Furthermore, they are also barred from registering with the CFTC in future, in any market regulated by the CFTC or engaging in any further violation of the CEA.

This case shows the CFTC’s effort to safeguard investors as the market of digital assets becomes more complex than ever. The judgment gives investors a cautionary tale for entrusting the cryptocurrency firms and not checking claims critically, as the industry needs more transparency and accountability.