The Commodity Futures Trading Commission (CFTC) has filed a comprehensive enforcement action against a California man and his company for orchestrating an elaborate romance scam that duped numerous investors out of over $1 million. The scheme, cleverly named “Pig Butchering,” involved cultivating romantic relationships to exploit unsuspecting victims in the crypto investment space. This alarming case sheds light on the rise of romance-related scams during the pandemic and emphasizes the CFTC’s commitment to safeguarding investors in the ever-evolving digital asset landscape.
Cunwen Zhu, a California businessman and the accused individual, allegedly deceived at least 29 customers between April 2021 and March 2022, leading to losses exceeding $1.3 million. Zhu’s company, Justby International Auctions, purportedly solicited funds from investors for digital asset commodity and forex trading but misappropriated the money for personal use. Instead of investing in cryptocurrencies and forex exchanges as promised, Zhu diverted the funds to various accounts and platforms controlled by his associates, who played integral roles in executing the fraudulent scheme.
The CFTC’s enforcement action, filed in the U.S. District Court for the Central District of California, highlights the alarming tactics employed by Zhu and his partners. By manipulating the victims emotionally, Zhu’s associates deceived them with false narratives, creating a sense of trust before presenting the fraudulent financial opportunity. As individuals sought connection and companionship amid the isolating effects of the pandemic, fraudsters seized the opportunity to exploit vulnerable individuals online.
CFTC Director of Enforcement Ian McGinley underscored the growing trend of romance-related scams as a consequence of the pandemic-induced loneliness. He stated, “As people sought to escape the isolation of the pandemic and form a connection to others online, fraudsters saw a new venue to prey on and take advantage of the public.” The CFTC’s swift response demonstrates their dedication to protect individuals from such fraudulent activities, while urging users to remain vigilant and exercise caution when engaging in digital asset investments.
The romance scam case unveils a broader issue plaguing the crypto industry—the need for heightened awareness and regulatory measures. The CFTC has been at the forefront of warning investors about the risks associated with romance scams involving digital assets. As a regulatory authority, the CFTC has issued multiple fraud advisories and articles in recent months, aimed at educating users and deterring them from falling victim to scams.
This incident coincides with the ongoing debate surrounding the regulatory landscape for cryptocurrencies. While the Securities and Exchange Commission (SEC) has asserted its jurisdiction, considering most cryptocurrencies as securities, the CFTC has previously categorized Bitcoin and Ethereum as commodities. The CFTC’s role in regulating digital assets is pivotal, as they work to protect investors’ interests while ensuring a fair and transparent marketplace.
The CFTC’s enforcement action against Cunwen Zhu and his company sheds light on the rising trend of romance scams targeting crypto investors during the pandemic. The case underscores the importance of regulatory vigilance and user awareness within the digital asset industry. While the SEC asserts its jurisdiction over cryptocurrencies