December 20, 2023

The U.S. District Court for the Central District of California, in a landmark decision on December 7, issued a default judgment against Cunwen Zhu and his company, Justby International Auctions. Zhu, a California resident, and his company were found liable for fraudulent activities involving digital asset commodities and/or forex trading, as well as misappropriating customer funds. This judgment was announced by the Commodity Futures Trading Commission (CFTC) in their Press Release No. 8841-23.

This case is significant as it marks the CFTC’s first foray into addressing a specific type of fraud known as “Sha Zhu Pan” or “Pig Butchering.” This scheme involves fraudsters developing a seemingly friendly or romantic relationship with potential victims to gain their trust. Once a rapport is established, they deceive the victims into investing in fraudulent financial opportunities. Zhu and Justby played a critical role in this scheme as “money mules,” collecting funds from customers and then funneling these to other participants in the fraud. Between April 2021 and March 2022, Zhu and Justby wrongfully appropriated about $1,352,843 from customers under the guise of investing in digital asset commodities and/or forex trading.

As a consequence of their actions, Zhu and Justby are now banned from trading in any markets regulated by the CFTC and are prohibited from registering with the Commission. Furthermore, they are ordered to pay a substantial civil monetary penalty of $4,000,000 and $1,352,843 in restitution to the victims.

The court’s decision was based on a complaint filed in June 2023, which detailed the intricate and coordinated efforts by Zhu and Justby to defraud customers. Approximately 29 customers were misled into transferring over $1,352,843 to Justby for the purpose of trading digital assets and/or forex on what they believed to be legitimate platforms.

Contrary to their promises, Zhu and Justby diverted these funds for personal use and to other accounts controlled by their co-conspirators. The customers were led to believe that actual trading was occurring on their behalf, but in reality, no such trading took place. The trading platforms were under the control of other fraud scheme members, and customers were provided with falsified trade records to maintain the illusion of genuine trading activity.

Parallel to the CFTC’s legal actions, Zhu is also facing criminal charges. On April 19, he was charged with wire fraud in the Middle District of Florida (United States of America v. Cunwen Zhu, Case No. 3:23-cr-66-BDJMCR). This charge relates to conduct similar to that alleged in the CFTC’s complaint.

Despite these legal victories, the CFTC warns that the restitution orders may not necessarily lead to the recovery of lost funds, as the perpetrators may lack sufficient assets. Nevertheless, the CFTC reaffirms its commitment to protecting customers and ensuring that such fraudsters are brought to justice. This case serves as a cautionary tale and underscores the need for vigilance in the digital asset and forex trading spaces, particularly against sophisticated and deceptive schemes like the “Pig Butchering” fraud.

The full CFTC Order can be found here: CFTC v. Cunwen Zhu and Justby International Auctions.