A US federal court has ordered defendants to pay $4.25 million in penalties as a result of operating a virtual currency scam known as ATM Coin.
Blake Harrison Kantor and Nathan Mullins, both from New York — and corporate entities Blue Bit Banc, (UK); Blue Bit Analytics, (Turks and Caicos); and Mercury Cove Inc and G. Thomas Client Services, (New York) — are accused of committing fraud and misappropriating customer funds.
According to the court, Kantor, Blue Bit Analytics, and G. Thomas Client Services, took customer funds and illegally acted as Futures Commission Merchants without having registered with the Commodity Futures Trading Commission (CFTC).
The case was first submitted in April last year and charged the defendants with fraud in connection with a binary options scam.
The CFTC said defendants asked public customers to invest in binary options, promising the opportunity to earn predetermined amounts based on the price of the commodities at specific points in time.
Although customers could trade for themselves, or have a Blue Bit Ban representative do so for them, Mullins and Kantor failed to tell customers that a computer software program used by Blue Bit Banc fraudulently changed the data associated with their binary options investments.
Kantor and Mullins told most investors to transfer their funds to a bank account located in the island nation of St. Kitts and Nevis, making it harder to trace investor funds.
In addition, the defendants also converted Blue Bit Banc investments into ATM Coin, a worthless cryptocurrency that Kantor had misleadingly told victims was worth a substantial amount.