Key Highlights
- The CFTC announced a federal court’s default judgment against Brian Early and Alisha Ann Kingrey in the Fundsz digital asset and precious metals fraud case.
- The court ordered the defendants to pay $15.73 million in restitution and a $15.75 million civil monetary penalty, totaling approximately $31.48 million.
- Court findings stated that the defendants misrepresented Fundsz’s expected returns, trading performance, risk of loss, and withdrawal terms.
The Commodity Futures Trading Commission announced that the U.S. District Court for the Middle District of Florida entered a default judgment against defendants Brian Early and Alisha Ann Kingrey for their participation in a digital assets and precious metals fraud involving the Fundsz.
According to a September 30 CFTC release, the entry of the default judgment followed the court’s entry of consent orders against two other defendants for their roles in the scheme: Rachel Larralde, as personal representative of the estate of Rene Larralde, and Juan Pablo Valcarce. The default judgment and consent orders resolve all remaining claims in the CFTC’s action.
Court findings against Early and Kingrey
In entering the default judgment, the court found that Early and Kingrey, as Fundsz board members and social media moderators, made material misrepresentations and omissions concerning Fundsz’s expected profits, risk of loss, and historical trading performance. They also falsely represented that participants’ money would be traded according to a proprietary algorithm and could be withdrawn with interest after 180 days.
The court further found that when Early and Kingrey learned of the CFTC’s investigation, they began walking back their profitability claims and worked to eliminate Fundsz’s social media presence.
The court ordered Early and Kingrey to pay $15,732,455 in restitution and a $15,752,455 civil monetary penalty. It also permanently enjoined them from further violations of the Commodity Exchange Act and CFTC regulations, as charged, and imposed permanent registration and trading bans.
Original complaint and case background
The CFTC announced its complaint on August 11, 2023, after filing its complaint against Rene Larralde of Melbourne, Florida; Juan Pablo Valcarce of West Melbourne, Florida; Brian Early of New Orleans, Louisiana; Alisha Ann Kingrey of Franklin, Arkansas; and their unincorporated entity, Fundsz. The complaint charged them with fraudulent solicitation from clients to purportedly trade in cryptocurrencies and precious metals.
On August 2, 2023, U.S. District Court Judge Wendy Berger signed an ex parte statutory restraining order freezing the defendants’ assets, preserving records, and appointing a temporary receiver. A hearing on the CFTC’s motion for preliminary injunction was scheduled for August 23, 2023.
According to the complaint, from at least October 2020, the defendants solicited participants with claims that Fundsz had historically produced over 3% returns per week using a proprietary algorithm for trading cryptocurrencies and precious metals.
They also claimed they made on-time and accurate payments for seven years and stated that a one-time $2,500 contribution could be expected to grow to $1 million within 48 months with no additional deposits. The defendants pitched Fundsz with a charitable purpose using the tagline “Fundsz For Your Cause,” implying that contributions would support clean water, humanitarian, health, education, and disaster relief efforts.
The complaint alleged the defendants claimed more than 14,000 participants. It further alleged that Fundsz did not trade customer funds and that any reported customer gains were illusory, with fictional weekly returns reported to customers. In its litigation, the CFTC sought restitution to defrauded investors, disgorgement of ill-gotten gains, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act.
CFTC Director of Enforcement Ian McGinley said in the August 2023 announcement: “The CFTC continues to root out individuals who defraud customers in the cryptocurrency and precious metals markets. Though the products fraudsters purport to trade and their methods of attracting victims, in this case through social media, may have changed, the old adage ‘if something sounds too good to be true, it probably is’ remains as valid as ever.”
The CFTC cautioned that orders requiring repayment of funds to victims may not always result in the recovery of lost money because the wrongdoers may not have sufficient funds or assets. The Division of Enforcement staff responsible for the matter were Douglas Snodgrass, Matthew Edelstein, Stacie Pan, Elizabeth M. Streit, Scott Williamson, and Robert Howell.
Related enforcement actions
In separate recent actions, the U.S. Securities and Exchange Commission charged four entities in two civil cases filed September 29 in the U.S. District Court for the Southern District of New York over alleged cryptocurrency and artificial-intelligence investment scams that collectively misappropriated more than $15 million from retail investors.
The complaints target Cryptoaiml Ltd. and Cryptoaiml Capital Foundation, alleged to have taken more than $12.5 million from more than 300 retail investors, and TSAI Pro Ltd. and TSAI Capital Foundation, alleged to have misappropriated at least $2.8 million from about 1,715 investors. The SEC said the schemes used online platforms, including WhatsApp, and falsely claimed to be regulated or registered with the SEC.
Separately, the UK Financial Conduct Authority secured £851,402.27 in confiscation orders against two men convicted of running a £1.5 million crypto investment fraud. At a hearing at Southwark Crown Court on September 28, Raymondip Bedi was ordered to pay £603,404.28 and Patrick Mavanga £247,997.99. The FCA said the recovered funds would be returned to affected investors.
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