Release Number 8789-23

CFTC Charges Mosaic Exchange Limited and Sean Michael with a Fraudulent Solicitation and Digital Asset Commodities Trading Scheme

September 27, 2023

Washington, D.C. — The Commodity Futures Trading Commission today announced it filed a civil enforcement action in the U.S. District Court for the Southern District of Florida against Mosaic Exchange Limited, a Pennsylvania limited liability company, and its owner and Chief Executive Officer Sean Michael, presently or formerly of Boca Raton, Florida, for running a fraudulent digital asset commodity scheme.

The complaint alleges the defendants fraudulently solicited and induced at least 17 people in the U.S. and other countries to give them hundreds of thousands of dollars’ worth of bitcoin or other funds for the defendants to trade bitcoin and other digital asset commodities on the customers’ behalves, and misappropriated customer funds.

In its continuing litigation, the CFTC seeks restitution, disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged.

Case Background

According to the complaint, from approximately February 2019 through June 2021, the defendants falsely represented and advertised, among other things, that Mosaic was a cryptocurrency trading platform with tens of millions of dollars in assets under management; offered a Mosaic-designed proprietary trading algorithm to trade that was purportedly 82% accurate, and purportedly had profit margins at various times ranging from “20% [to] 60% per month” and “10% to 50+% per month”; and had partnerships or broker agreements with certain cryptocurrency trading exchanges. The defendants made these false representations while Mosaic was acting as a commodity pool operator (CPO) and Michael was acting as an associated person of a CPO.

As alleged in the complaint, in actuality, Mosaic was not a trading platform with tens of millions of dollars of assets under management; Mosaic did not have the track record of trading profitability as represented, but instead it lost money trading for customers; and Mosaic did not have partnership or broker agreements with the cryptocurrency exchanges as the defendants had advertised. As a result, a number of customers lost all of their money.     

The Division of Enforcement staff responsible for this case are Kathleen Banar, Steve Kim, Kara Mucha, and Rick Glaser.

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CFTC’s Commodity Pool Fraud Advisory

The CFTC has issued several customer protection Fraud Advisories and Articles, including the Commodity Pool Fraud Advisory, which provides information about a type of fraud involving individuals and firms, often unregistered, offering investments in commodity pools. The CFTC also strongly urges the public to verify a company’s registration with the CFTC before investing funds. If an entity is unregistered, a customer should be wary of providing funds to that entity. A company’s registration status can be found using NFA BASIC.

Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, 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.