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CFTC Bitcoin Fraud Enforcement Action

CFTC Bitcoin Fraud Enforcement Action

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Bitcoin Fraud Enforcement Action: Bitcoin & Binary Options Fraud Scheme: CFTC Charges Colorado Resident Dillon Michael Dean & The Entrepreneurs Headquarters Limited

On January 19, 2018, the Commodity Futures Trading Commission (CFTC) issued a press release stating that on January 18, 2018, the CFTC filed a civil enforcement action in United States District Court, Eastern District of New York, against Defendants Dillon Michael Dean of Longmont, Colorado, and his company, The Entrepreneurs Headquarters Limited, a UK-registered company (“Bitcoin Defendants”).

Bitcoin Fraud Enforcement Action: Bitcoin Defendants Engaged in Scheme to Solicit Bitcoin

The CFTC complaint charges the Bitcoin Defendants with engaging in a fraudulent scheme to solicit Bitcoin from members of the public, misrepresenting that customers’ funds would be pooled and invested in products including binary options, making Ponzi-style payments to commodity pool participants from other participants’ funds, misappropriating pool participants’ funds, and failing to register with the CFTC as a Commodity Pool Operator and Associated Person of a Commodity Pool Operator.

Bitcoin Fraud Enforcment Action: CFTC’s Director of Enforcement Comments

The CFTC’s Director of Enforcement, James McDonald, stated that the Bitcoin Defendants, “[a]s alleged in the [c]omplaint, . . . sought to take advantage of that public interest, offering retail customers the chance to use Bitcoin to invest in binary options, when in reality they were only buying into a Ponzi scheme.” The CFTC’s Director of Enforcement emphasized that “. . . the CFTC will continue to take swift action to stop such fraudulent schemes and to hold fraudsters accountable for their misconduct.”

Bitcoin Fraud Enforcement Action: CFTC’s Complaint Allegations Against Bitcoin Defendants

The CFTC’s complaint against the Bitcoin Defendants alleges the following:

From approximately April 2017 through the present, the Bitcoin Defendants, who have never been registered with the CFTC in any capacity, engaged in a fraudulent scheme, through which they solicited at least $1.1 million worth of Bitcoin from more than 600 members of the public.

The Bitcoin Defendants allegedly promised to convert this Bitcoin into fiat currency to invest on the customers’ behalf in a pooled investment vehicle for trading commodity interests, including trading binary options on an online exchange designated as a contract market by the CFTC.

Potential pool participants were solicited to invest with the Bitcoin Defendants by false claims of trading expertise and promises of high rates of return.

Rather than convert customers’ Bitcoin to fiat currency to invest in binary options contracts, as promised, the Bitcoin Defendants misappropriated their customers’ funds, including, like a Ponzi scheme, use of the funds to pay other customers.

The Bitcoin Defendants solicited customer deposits using company websites, YouTube videos, and Facebook posts, where the Bitcoin Defendants claimed that customers’ funds would be pooled and invested in commodity options on behalf of customers, that Bitcoin Defendant Dillon Michael Dean had “strong skills” in options trading, and that the Bitcoin Defendants were generating high rates of return through trading commodity options, among other false claims.

The Bitcoin Defendants, however, were not actually engaged in trading on behalf of their customers, and the Bitcoin Defendants’ purported trading profits were fictitious. As alleged in the CFTC’s complaint, the Bitcoin Defendants stopped making payments to their customers, having misappropriated over $1 million in customers’ funds, while Bitcoin Defendant Dean has launched another similar purported trading venture under the name Real Trade Profits, using a website to solicit customers to deposit Bitcoin for a pooled investment in binary options trading and promising high rates of return.

The CFTC’s complaint (CFTC v. Dean, et al, No. 18-00345) seeks injunctive and other relief, restitution, and civil monetary penalties under the Commodity Exchange Act.

Bitcoin Fraud Enforcement CFTC

Image: “New bitcoin logo,” Bitboy (Derived from Bitcoin logo.svg), CC0 1.0 Universal

Bitcoin Cryptocurrency & Initial Coin Offering Investor Information

Please click Kehoe Law Firm, P.C. for more information about cryptocurrencies, Initial Coin Offerings, and other class action investigations.

Kehoe Law Firm also encourages investors to review the following SEC and CFTC cryptocurrency- and Initial Coin Offering-related information:

SEC Chairman Jay Clayton Statement on Cryptocurrencies and Initial Coin Offerings (Dec. 11, 2017)

SEC Division of Enforcement and SEC Office of Compliance Inspections and Examinations Statement on Potentially Unlawful Promotion of Initial Coin Offerings and Other Investments by Celebrities and Others (Nov. 1, 2017)

Investor Alert: Public Companies Making ICO-Related Claims(Aug. 28, 2017)

Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO (July 25, 2017)

Investor Bulletin: Initial Coin Offerings (July 25, 2017)

Investor Alert: Bitcoin and Other Virtual Currency-Related Investments (May 7, 2014)

Investor Alert: Ponzi Schemes Using Virtual Currencies (July 23, 2013)

CFTC Customer Advisory: Understand the Risks of Virtual Currency Trading (December 15, 2017)

A CFTC Primer on Virtual Currencies (October 17, 2017)

Source: CFTC.gov and SEC.gov 

Kehoe Law Firm, P.C.