Today, the Commodity Futures Trading Commission (CFTC or Commission) instituted a settled public administrative proceeding against Phillip J. Reichenthal (Reichenthal) and Randy Craig Levine (Levine), for engaging in digital asset fraud.

Reichenthal and Levine engaged in a scheme to defraud bitcoin investors through off-exchange bitcoin transactions.  Reichenthal, an attorney licensed in Florida, promised investors he would hold their funds in escrow in his attorney trust account until a purported  Bitcoin transaction with Levine could take place.  Reichenthal and Levine, however, had no intention of acquiring or distributing any Bitcoin to investors.  Upon receipt of the investor funds, Reichenthal transferred the funds to Levine without any distribution of Bitcoin by Levine.  The investors never received any Bitcoin and their funds were never returned.

Reichenthal and Levine pled guilty in a parallel criminal action in the Southern District of New York.  The court sentenced Reichenthal to time-served with three years of supervised release and Levine to a term of 70 months imprisonment.  Both Reichenthal and Levine have agreed to a settlement with the Commission.  Pursuant to the terms of the settlement, the Commission ordered Reichenthal and Levine to pay $5.375 million in restitution.  In addition, they have been permanently barred from trading and registration with the CFTC.

Unfortunately, digital commodity asset or cryptocurrency related fraud has become all too common.[1]  Fraudsters often take advantage of individual retail customers’ fear of missing out on and interest in access to novel asset classes to perpetrate their scams.  Investor education and enforcement actions are critical to our efforts to prevent fraudsters from deceiving hard-working investors.[2]  Accordingly, I strongly encourage all members of the public to stay informed about the potential scams and abuses in digital assets markets by visiting our investor advisory page.[3]  Fraudsters offering guaranteed or unusually high returns—or both—should in particular prompt scrutiny and additional diligence before transferring any funds. 

I applaud the efforts of the CFTC’s Division of Enforcement and would like to recognize the staff bringing this litigation:  David Oakland, Lara Turcik, Peter Janowski, Steven Ringer, Lenel Hickson, Jr., and Manal M. Sultan.

[1] See, e.g., Statement of Commissioner Kristin N. Johnson Regarding CFTC Consent Order of $2.8 Million in Restitution for Virtual Currency Fraud:  A Call to Action: Let’s Use Our Existing Authority to Stop Crypto-Fraud, Dec. 1, 2022, https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement120122; Statement of Commissioner Kristin N. Johnson: Enforcement Action To Stop Bitcoin Fraud Targeting the Spanish-Speaking Community, May 24, 2023, https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement052423; Statement of Commissioner Kristin N. Johnson Regarding Fraud and Misappropriation by a Digital Asset Ponzi Scheme, Feb. 16, 2023, https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement021623; CFTC Release Number 8023-19, CFTC Charges Individual with Multi-Million Dollar Bitcoin Fraud, Sept. 30, 2019, https://www.cftc.gov/PressRoom/PressReleases/8023-19; CFTC Release Number 8549-22, CFTC Charges South African Pool Operator and CEO with $1.7 Billion Fraud Involving Bitcoin, Jun. 30, 2022, https://www.cftc.gov/PressRoom/PressReleases/8549-22; CFTC Release Number 8498-22, CFTC Charges Four Operators for $44 Million Bitcoin Ponzi and Misappropriation Schemes, Mar. 8, 2022, https://www.cftc.gov/PressRoom/PressReleases/8498-22.

[2] See, e.g., Keynote Address of Commissioner Kristin Johnson at UC Berkeley Law Crypto Regulation Virtual Conference, Feb. 8, 2023, https://www.cftc.gov/PressRoom/SpeechesTestimony/opajohnson3; Keynote Address of Commissioner Kristin Johnson at Digital Assets @ Duke Conference, Duke’s Pratt School of Engineering and Duke Financial Economics Center, Jan. 26, 2023, https://www.cftc.gov/PressRoom/SpeechesTestimony/opajohnson2; see also Statement of Commissioner Kristin N. Johnson Regarding CFTC Action Against Market Manipulation Scheme in the Digital Assets Markets, Jan. 9, 2023, https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement010923; Statement of Commissioner Kristin N. Johnson Regarding CFTC Consent Order of $2.8 Million in Restitution for Virtual Currency Fraud, Dec. 1, 2022, https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement120122.

[3] See CFTC/SEC Investor Alert: Funds Trading in Bitcoin Futures, https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/fraudadv_funds_trading_in_bitcoin_futures.html; CFTC Investor Alert: Watch Out for Fraudulent Digital Asset and "Crypto" Trading Websites (issued Apr. 26, 2019); CFTC Customer Advisory: Use Caution When Buying Digital Coins or Tokens (issued July 16, 2018); CFTC Customer Advisory: Beware Virtual Currency Pump-and-Dump Schemes (issued Feb. 15, 2018); CFTC Customer Advisory: Beware "IRS Approved" Virtual Currency IRAs (issued Feb. 2, 2018); CFTC Customer Advisory: Understand the Risks of Virtual Currency Trading (issued Dec. 15, 2017), https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/index.htm.