CFTC Announces Court Order for Defendants in Digital Asset Fraud Case to Pay Over $1.1 Million

The U.S. Commodity Futures Trading Commission (CFTC) announced a court final default judgment against Mosaic Exchange Ltd., a Pennsylvania-based limited liability company, and its owner and Chief Executive Officer, Sean Michael of Miami, Florida. The judgment resolved the CFTC’s charges of operating a fraudulent digital asset commodity scheme. The CFTC filed a three-count complaint on September 26, 2023, against Mosaic Exchange and Michael, alleging fraudulent solicitation, trading scheme, and misappropriation. 

According to the court's order, between February 2019 and June 2021, Mosaic and Michael fraudulently solicited 18 individuals from the United States and other countries to trade Bitcoin and other digital asset commodities and misappropriated customer funds. They falsely claimed to manage tens of millions of dollars in assets with specific monthly profits and algorithm "win" rates. Additionally, they falsely asserted that they had partnership or broker agreements with certain cryptocurrency trading exchanges.

The final default judgment order found that while acting as a commodity pool operator (CPO) and associated person of a CPO, Michael and Mosaic made false claims about profit margins. Michael, the sole owner and control person of Mosaic, used customer funds for personal expenses, including travel and dining.

The order requires Mosaic and Michael to pay jointly and severally approximately $468,600 in restitution, $60,980 in disgorgement, and a $660,000 civil monetary penalty. Furthermore, the order permanently enjoins them from violating the Commodity Exchange Act, bans them from registering with the CFTC, and prohibits them from trading in any CFTC-regulated markets.