A New York federal court delivered a major win to the Commodities Futures Trading Commission this week with a permanent ban against cryptocurrency operator CabbageTech Corp, according to reporting from Bloomberg. In addition to the ban, Judge Jack B. Weinstein also ordered CabbageTech head Patrick McDonnell to pay more than a million dollars in restitution and penalties.
In early 2018, the CFTC charged McDonnell’s Staten Island company with fraud and misappropriation of customer funds. The regulatory agency had alleged that CabbageTech lured customers with promises of trading advice that could net substantial returns – in some cases, as high as 300 percent in just one week.
McDonnell's company failed to provide the promised advice. In its initial complaint, the CFTC noted that CabbageTech’s domain name was being sold while much of the company’s social media had disappeared – along with customers’ funds.
McDonnell represented himself in court, despite the judge’s recommendation that he retain free legal counsel. The defendant had reportedly argued that the CFTC had no regulatory authority over his company. Judge Weinstein rejected that line of argument, and the nonjury trial convinced him that McDonnell had defrauded investors and misappropriated their funds.
Weinstein’s order was a default judgment, since the defendant had apparently abandoned his defense by refusing to show up for the trial. The order includes restitution in the amount of $290,429, as well as penalties totaling $871,287.