On July 9, 2018, a New York federal court ordered Dillon Michael Dean (Dean) of Longmont, Colorado, and The Entrepreneurs Headquarters Limited (TEH), Dean’s UK-registered company, to pay over $1.9 million in civil monetary penalties and restitution in connection with a lawsuit brought by the Commodity Futures Trading Commission (CFTC).
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.
Judge Feuerstein’s Order found that from approximately April 2017 through the filing of the CFTC’s Complaint on January 18, 2018 (see CFTC Complaint and Press Release 7674-18), 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’ fraThe Order further found that Defendants solicited customer deposits using company websites, YouTube videos, and Facebook posts, where Defendants claimed that customers’ funds would be pooled and invested in commodity options; that Dean, TEH’s sole principal, had “strong skills” in options trading; and that Defendants were generating high rates of return through trading commodity options, among other false claims. But Defendants 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 char
The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.
This action was brought in connection with the CFTC Division of Enforcement Virtual Currencies Task Force, and the staff members responsible for this case are Christopher Giglio, David C. Newman, W. Derek Shakabpa, David MacGregor, Lenel Hickson Jr., and Manal M. Sultan.
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The CFTC has issued a customer advisory to inform the public of possible risks associated with investing or speculating in virtual currencies or recently launched Bitcoin futures and options.
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