Mosaic Exchange fined $1.1M for fraudulent crypto practices

The Commodity Futures Trading Commission (CFTC) has imposed a penalty of over $1.1 million on Mosaic Exchange Ltd. and its CEO, Sean Michael, for operating a fraudulent digital asset trading scheme.

The U.S. District Court for the Southern District of Florida issued final default judgments against the defendants, following a complaint filed by the CFTC in September 2023.

The court found that from February 2019 to June 2021, Mosaic Exchange solicited funds from 18 customers under false pretenses, claiming significant profit margins, assets under management, and partnerships with cryptocurrency exchanges.

Mosaic falsely advertised tens of millions in managed assets and claimed their proprietary algorithm achieved an 82% accuracy rate, promising monthly returns ranging from 20% to 60%.

However, the CFTC revealed that these figures were based on hypothetical projections rather than actual trading results.

The court's judgment requires Mosaic and Michael to pay approximately $468,600 in restitution to defrauded customers, $60,980 in disgorgement of ill-gotten gains, and a civil monetary penalty of $660,000.

“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,” the CFTC stated.

Evidence showed that Michael misappropriated customer funds for personal expenses such as travel and dining instead of investing them as promised.

The CFTC reiterated its commitment to protecting investors and advised the public to verify firms’ registration through the National Futures Association database before investing.

Suspicious activities can be reported to the CFTC via a hotline or its whistleblower program, which offers monetary rewards for actionable tips.