Release Number 9032-25
Mosaic Exchange Ltd. and CEO Ordered to Pay Over $1.1 Million for Fraudulent Digital Asset Commodity Scheme
January 13, 2025
WASHINGTON, D.C. — The Commodity Futures Trading Commission today announced the U.S. District Court for the Southern District of Florida entered orders of final default judgment on Dec. 23 and 30, 2024, against Mosaic Exchange Ltd., a Pennsylvania limited liability company, and its owner and Chief Executive Officer Sean Michael, of Miami, Florida, for running a fraudulent digital asset commodity scheme. The orders stem from the CFTC’s three-count complaint filed Sept. 26, 2023, charging the defendants in connection with their fraudulent digital asset solicitation and trading scheme and misappropriation. [See CFTC Press Release No. 8789-23].The default judgment order finds Mosaic and Michael liable for all violations of the Commodity Exchange Act and CFTC regulations alleged in the complaint including that they fraudulently solicited 18 individuals in the U.S. and other countries to supposedly trade bitcoin and other digital asset commodities for them, and for misappropriating customer funds. The default judgment order requires them to pay jointly and severally approximately $468,600 in restitution, $60,980 in disgorgement, and a $660,000 civil monetary penalty. The order also permanently enjoins them from engaging in conduct that violates the CEA, as charged, and permanently bans them from registering with the CFTC and from trading in any CFTC-regulated markets.Case BackgroundThe default judgment order finds that from about February 2019 to June 2021, the defendants fraudulently solicited and induced customers into transferring Bitcoin and other funds to Mosaic by claiming, among other things, that Mosaic had tens of millions of dollars in assets under management, had historically earned specific monthly profits, and the company’s algorithm had specific “win” rates, and had partnership or broker agreements with certain cryptocurrency trading exchanges. The defendants made false claims on profit margins while Mosaic was acting as a commodity pool operator and Michael was acting as an associated person of a CPO. However, the order finds Mosaic did not have the assets under management as represented; Mosaic did not generate win rates as represented but rather hypothetical projections — i.e., not actual trading; Mosaic’s trading accounts — into which the defendants put customers’ money did not generate profits as represented; and Mosaic did not have a partnership or broker agreement with cryptocurrency exchanges as advertised. In addition, Michael, who was Mosaic’s sole owner, principal, CEO and control person, used some customer funds to pay for personal expenditures such as travel, dining at restaurants and other personal purposes. The Division of Enforcement staff responsible for this case are Steve Kim, Kara Mucha, Erica Bodin, Kathleen Banar and Rick Glaser.* * * * * CFTC’s Commodity Pool Fraud AdvisoryThe CFTC has issued several customer protection fraud advisories and articles, including the Commodity Pool Fraud Advisory, which provides information about fraud involving individuals and firms, often unregistered, offering investments in commodity pools. The CFTC strongly urges the public to verify a company’s registration with the CFTC at NFA BASIC before investing funds. A customer should be wary of providing funds to any unregistered entity.Suspicious activities or information, such as possible violations of commodity trading laws, can be reported to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online or contact the Whistleblower Office. Whistleblowers may be eligible to receive between 10 and 30 percent of the monetary sanctions collected, paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.
-CFTC-
