CFTC Prosecutes Bitcoin Investment Fraud Schemer, Has To Pay $1.9 Million+ In Penalties
The U.S. Commodity Futures Trading Commission (CFTC) has taken another step in its actions against Dillon Michael Dean and his U.K.-registered company The Entrepreneurs Headquarters Limited (TEH).
In an Order and Default Judgment (Order) filed July 9, 2018, Judge Sandra J. Feuerstein of the U.S. District Court for the Eastern District of New York found that TEH and Dean (together, Defendants) engaged in a fraudulent scheme to solicit Bitcoin from members of the public, misrepresented that customers’ funds would be pooled and invested in products including binary options, and misappropriated pool participants’ funds; and that TEH and Dean failed to register with the CFTC as a Commodity Pool Operator (CPO) and Associated Person of a CPO, respectively, as required.
The judge’s order found that from approximately April 2017 through the filing of the CFTC’s Complaint on January 18, 2018, Defendants, who never registered with the CFTC in any capacity, engaged in a fraudulent scheme, through which they solicited at least $499,264.04 worth of Bitcoin from at least 127 members of the public.
Defendants promised to convert this Bitcoin into fiat currency to invest on their 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 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, Defendants misappropriated their customers’ funds. At least 120 customers suffered total losses of at least $432,184.79 as a result of Defendants’ fraud.
Dean solicited customer deposits using his websites, YouTube videos, and Facebook posts, where the Defendants made unsubstantiated claimed that customers’ funds would be pooled and invested in commodity options. Dean never actually engaged in trading on behalf of their customers, and Defendants’ purported trading profits were fictitious.
In addition to requiring Defendants, jointly and severally, to pay $432,184.79 in restitution to customers and a $1,497,792.12 civil monetary penalty, the Order imposed permanent trading and registration bans on Defendants, and permanently enjoined them from further violations of the Commodity Exchange Act and CFTC Regulations, as charged.
However, CFTC also warned the public that the imposition of a restitution order is not a guarantee that funds obtained fraudulently will actually be recovered as it depends on the financial status of the defendant.