Release Number 8841-23

Federal Court Orders California Resident and His Corporation to Pay Over $5 Million in Restitution and Penalties in a Romance Fraud Scheme

CFTC’s First Pig-Butchering Scam Judgment

December 20, 2023

Washington, D.C. — The Commodity Futures Trading Commission announced today the U.S. District Court for the Central District of California issued a default judgment granting a permanent injunction against California resident Cunwen Zhu and his company Justby International Auctions. The order, issued December 7, found Zhu and his company liable for fraudulently soliciting funds in connection with digital asset commodities and/or forex trading and misappropriating customers’ funds. [See CFTC Press Release No. 8726-23].

Zhu and Justby, in concert with other individuals and entities, operated a type of “romance fraud” commonly referred to as a “Sha Zhu Pan” or “Pig Butchering” scheme. In this type of scheme, the fraudsters cultivate a friendly or romantic relationship with a potential customer and “fatten” them up with falsehoods before soliciting the customer to participate in a fraudulent financial opportunity. As part of the scheme, Zhu and Justby acted as “money mules” by obtaining customer funds and then facilitating the transfer of the funds to other scheme players. From approximately April 2021 through March 2022, Zhu and Justby fraudulently misappropriated approximately $1,352,843 in customer funds intended for digital asset commodity and/or forex trading. This is the CFTC’s first judgment related to pig-butchering/romance scam fraud.

The order bans Zhu and Justby from trading in any CFTC regulated markets or registering with the CFTC. It also requires them to pay a $4,000,000 civil monetary penalty and $1,352,843 in restitution. 

Case Background

The order stems from a June 2023 complaint, which alleged Zhu and Justby took part in an elaborate and well-coordinated scheme to defraud customers with respect to digital asset commodities and/or forex trading. Approximately 29 customers transferred more than $1,352,843 to Justby to trade digital assets and/or forex on supposedly legitimate trading platforms. Instead of using the funds to trade on behalf of these customers, Zhu and Justby misappropriated all of the customers’ funds. Zhu used some of the funds for his personal use and transferred the majority of the funds to bank accounts, digital wallets, and digital asset trading platforms under the control of other members of the fraudulent scheme. In fact, no actual trading took place on behalf of customers and the trading platforms were controlled by other members of the fraudulent scheme. In addition, the fraudulent scheme provided customers with false trade records in order to maintain the pretense they were engaged in actual trading. 

Parallel Criminal Action

On April 19, Cunwen Zhu was charged with one count of wire fraud in the Middle District of Florida, United States of America v. Cunwen Zhu, Case No. 3:23-cr-66-BDJMCR, for conduct similar to that alleged in the CFTC’s complaint. 

The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The Division of Enforcement staff responsible for this case are Karen Kenmotsu, Dmitriy Vilenskiy, Chrystal Gonnella, Kelly Makimoto-Murphy, Traci Rodriguez, and Paul G. Hayeck. Romance Investment Fraud Task Force staff Jenny Chapin and Elsie Robinson also assisted with this matter.

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The CFTC has issued a customer protection Fraud Advisory that provides the warning signs of digital asset and foreign currency romance scams.

The CFTC has also issued a customer advisory regarding acting as a “money mule”  that warns customers to beware of offers to receive and forward money.