Shipkevich Bitcoin and ICO Attorney
Felix Shipkevich January 19, 2018
CFTC charges Bitcoin and virtual currency fraud

On January 18, 2018 the CFTC filed a civil enforcement action and a federal civil enforcement action in the U.S. District Court for the Eastern District of New York against The Entrepreneurs Headquarters Ltd., and CabbageTech, Corp. d/b/a Coin Drop Markets (CDM), respectively, for fraudulent schemes. Both charges involve fraud in Bitcoin virtual currency, signaling the Commission continues to treat such Cryptocurrency as a commodity. This marks the first high profile Bitcoin case of the year and since the Bitfinex actual delivery enforcement action.

 

CFTC Charges Dillon Michael Dean and His Company, The Entrepreneurs Headquarters Limited, with Engaging in a Bitcoin and Binary Options Fraud Scheme

The CFTC complaint alleges that since April 2017 the Dillon Michael Dean and The Entrepreneur Headquarters engaged in a Ponzi scheme soliciting at least $1.1 million worth of Bitcoin from more than 600 people. Through social media like Facebook, YouTube, and their website, the Defendants promised to invest the victims’ Bitcoin after converting it to fiat currency, into a pooled investment for trading commodity interest, including binary options trade on an online exchange designated as a contract market by the CFTC. They advertised the company in false claims of trading expertise and guaranteed high rates of return. The Defendants had never been registered with the CFTC in any capacity and thus were also charged with failing to register with the CFTC as a Commodity Pool Operator (CPO) and Associated Person of a CPO as would have been required. Ultimately the solicited Bitcoin was never converted to fiat currency nor invested in binary option contracts, and instead misappropriated their funds by them to pay other customers in a Ponzi scheme fashion.

For the full complaint please follow this link.

 

CFTC Charges Patrick K. McDonnell and His Company CabbageTech, Corp. d/b/a Coin Drop Markets with Engaging in Fraudulent Virtual Currency Scheme

The CFTC charged the Defendants with fraud and misappropriation with purchases and trading of Bitcoin and Litecoin. Since January 2017 engaged in a fraudulent scheme to provide virtual currency trading advice and to purchase and trade virtual currency on behalf of the victims and get paid in the form of virtual currency. The Defendants never provided such services and misappropriated they payments. They promptly removed their website and social media marketing materials after receiving payments and cut all communications with their costumers. Neither Patrick K. McDonnell nor CDM ever registered with the CFTC for purchasing and trading on virtual currency.

For the full complaint please follow this link.

 

Through Litigation the CFTC seeks restitution to the defrauded victims, monetary penalties, disgorgement of illicit gains, and permanent trading registration bans for both these Bitcoin schemes.

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CFTC’s Customer Fraud Advisory on Virtual Currencies and Bitcoin 

The CFTC has issued a Customer Advisory on the Risks of Virtual Currency Trading to inform the public of possible risks associated with investing or speculating in virtual currencies or recently launched Bitcoin futures and options.  The CFTC has also issued several other customer protection Fraud Advisories that provide the warning signs of fraud.

Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online.