CFTC Alleges Cash FX Took $950 Million in Forex Ponzi Scheme That Never Had a Losing Day

For four years, Cash FX customers watched their accounts go up every single day. The Commodity Futures Trading Commission now says that was because the CEO typed the numbers in by hand.

The regulator has sued Cash FX Group and several executives and promoters, alleging they took about $950 million through a multilevel marketing forex scheme that was really a Ponzi, InvestmentNews reports. The complaint was filed around September 24 in federal court in the Middle District of Florida. The allegations are unproven and the court has not ruled.

The pitch

Cash FX, founded in Panama around 2018, promised returns from expert traders, proprietary software and AI. Some pitches advertised up to 15% per week. Between June 2019 and December 2023, the scheme drew in more than 400,000 accounts worldwide.

According to the CFTC, forex trading was de minimis at most. Less than 1% of participant funds went into actual trades. New deposits paid earlier investors, and account statements were false.

CEO Huascar Jose Lopez Castillo allegedly entered daily return rates manually, and every day from July 2019 to July 2023 was positive. Some rates were entered days in advance.

Where the money went

The CFTC says at least $121 million flowed to bitcoin wallets controlled by Lopez Castillo, who kept at least $96 million. Ronald Pope and his Nevada company The Conversion Pros, which ran the back office, allegedly received at least $15.4 million. Promoter Justin Halladay of Florida Power Team allegedly took at least $16 million.

Private messages cited in the complaint show Pope urging that trade rates be set so payouts would fire. After seeing evidence posted in a Facebook group, he allegedly wrote: "Oh ya I know its all BS."

When withdrawals stalled, the defendants blamed hackers. Records showed the CEO's admin account was canceling the withdrawals, Finance Magnates reports.

Warnings everyone ignored

Cash FX was dissolved in Panama in October 2022 but kept taking deposits into May 2023. Its site went dark in October 2023. None of the defendants were registered with the CFTC.

Regulators saw it coming. The UK's FCA issued a warning in December 2019, and regulators in at least 19 countries, including Ireland and Australia, followed over the years. By the end, about 81% of participants had lost a combined $406 million or more, including more than 6,000 US accounts that put in at least $27 million.

The CFTC is seeking restitution, disgorgement, civil penalties, trading and registration bans and an injunction. It lands in a busy stretch for the agency, which is also writing new rules on tokenized assets and customer funds.