The Commodity Futures Trading Commission (CFTC) continues to make strides in stomping out bad actors in the crypto space, with a case it recently brought resulting in a hefty fine for the offender.
On Monday, the CFTC announcedthat the defendant in its latest lawsuit, an outfit called The Entrepreneurs Headquarters (TEH), will have to pay over $1.9 million in civil monetary penalties and restitution.
The order came down on July 9.
A whole bunch of bad acts
The CFTC sued TEH after finding the company had engaged in a fraudulent scheme to solicit Bitcoin from members of the public.
The company had misled customers by saying their funds would be pooled and invested in products, including binary options. The CFTC established the funds had been misappropriated.
On top of that, TEH’s sole principal, Dillon Michael Dean, did not register his venture as a Commodity Pool Operator (CPO) with the CFTC nor himself as an Associated Person of a CPO, as the rules stipulate.
The fraudulent behavior went on from around April 2017 through January 18, 2018. During this time, Dean’s outfit solicited almost $500,000 worth of Bitcoin from at least 127 people.
The CFTC said in its statement:
“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.”
With “false claims of trading expertise and promises of high rates of return,” the defendants were able to dupe people into investing. Once they had the Bitcoins, they did not convert them to fiat currency to invest in binary options contracts, as promised.
How it was done
Dean pulled off his scam with simple website setups, YouTube videos, and Facebook posts.
Among the falsehoods disseminated were claims that:
customers’ funds would be pooled and invested in commodity options
Dean had “strong skills” in options trading
the outfit was generating high rates of return through trading commodity options
The company was even accused of making up trading profits.