A Colorado resident Dillon Michael Dean used his UK registered firm, The Entrepreneurs Headquarters Limited (TEH) in April 2018 to orchestrate a fraudulent bitcoin investment scheme that succeeded in generating a whopping $499,264.04 worth of bitcoin from 127 unsuspecting investors.
According to a U.S Commodity Futures Trading Commission press release on July 23, 2018, the criminal has been ordered to pay over $1.9 million as penalties.
Per the CFTC statement, in a default judgment passed on July 9, 2018, by Judge Sandra J. Feuerstein of the U.S District Court for the Eastern District of New York, the defendants deceived bitcoiners into believing they were a registered Commodity Pool Operator (CPO) that would help them pool their bitcoin, convert it to fiat and invest it in binary options “on an online exchange designated as a contract market by the CFTC.”
According to the statement, Dean, who failed to register with the CFTC as a Commodity Pool Operator (CPO), went ahead to misappropriate the cryptos instead of converting them to cash for investment purposes as claimed.
It is estimated that at least 120 holders have been defrauded of at least $432,184.79 by Dean.
Social Media Aided Crime
Social media platforms including Twitter have been an excellent tool used by bad actors to seamlessly convince investors to pump their hard earned money into scam projects.
As stated in the court order, Dean skillfully used company websites, created YouTube videos and Facebook posts to lure investors into investing in his fraudulent venture.
In the YouTube videos, the defendants made false claims of being experts in options trading, stating that their strong skills for the trade were helping clients to generate massive returns on investments.
Dean’s Bubble Burst
Dean and his firm have now been ordered to pay the sum of $432,184.79 in restitution to victims of the scheme and an additional $1,497,792.12 civil monetary penalty.
Importantly, prosecutors have permanently banned the criminals from engaging in trading activities or registering a trading company and desist from further violation of the Commodity Exchange Act and CFTC Regulations.
Interestingly, the CFTC has also made it clear to the victims that there is no guarantee whatsoever that they would recover all funds lost in the scam scheme as the “wrongdoers may not have sufficient funds or assets.”
While cases of fraud may not cease any time soon in the crypto verse, just like in the traditional finance system, it’s however worth noting that regulators have been hard at work crushing down these illicit operations.
On July 11, 2018, BTCManager informed that Canadian authorities had successfully recovered 420 bitcoins, worth $3,724 at the time, from the creator of the PlexCoin scam initial coin offering (ICO).