CFTC Cracks Down on California Firm for Romance Scam

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The Commodity Futures Trading Commission (CFTC) has recently filed charges against a California-based company, Justby International Auctions, and its CEO, Cunwen Zhu.

The civil enforcement action, filed in the U.S. District Court for the Central District of California, alleges that Zhu and Justby engaged in romance scam fraud, misappropriating over $1.3 million in customer funds intended for digital asset commodity and forex trading.

This case represents a significant milestone for the CFTC, as it is the first time the agency has taken action against a romance scam, shedding light on an increasingly popular form of fraud.

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The Elaborate Fraud Scheme

The allegations, as outlined in the complaint, reveal a carefully coordinated operation that deceived at least 29 customers who transferred over $1.3 million to Justby for the purpose of trading digital assets and forex on seemingly legitimate platforms. 

However, instead of conducting trades on behalf of customers, Zhu and Justby misappropriated the funds, diverting them for personal use and transferring a majority to other participants in the fraudulent scheme. The scheme involved the provision of false trade records to maintain the illusion of genuine trading activity.

The CFTC Seeks Justice for Defrauded Customers

One of the key goals of the CFTC’s lawsuit against Zhu and Justby is to ensure that defrauded consumers get compensated for their losses. By securing the return of funds, the CFTC aims to mitigate the financial harm inflicted upon victims and restore a measure of justice to those affected by the scam.

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Specifically, the litigation aims to secure the return of funds to victims, disgorgement of ill-gotten gains, imposition of civil monetary penalties, trading bans, and a permanent injunction against future violations of the Commodity Exchange Act (CEA) and CFTC regulations.

The Expansion of Romance Scams

Romance scams have gained in popularity in recent years, preying on people hoping for love and friendship online. Earlier reports claimed that Americans lost $185 million to such scam schemes between January 2021 and March 2022.

Last year, the Delaware Department of Justice’s Investor Protection Unit suspended the operations of 23 organizations and people involved in crypto romance frauds.

These scams involve perpetrators creating fake identities and building emotional connections with their victims, often over an extended period. Once trust is established, the scammers manipulate victims into sending money, usually through a series of carefully crafted narratives and pleas for financial assistance.

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