CFTC Files Suits Against Crypto Investment Schemes for Alleged Fraud

The U.S. Commodity Futures Trading Commission (CFTC) brought two lawsuits against allegedly fraudulent cryptocurrency investment schemes yesterday.

The cases, both filed in the U.S. federal court in the New York Eastern District, are the latest move from the country’s derivatives regulator in bringing closer scrutiny over activities involving cryptocurrencies, which the agency regulates as commodities.

The CFTC and the Securities and Exchange Commission published a joint statement on the lawsuits, attributed to SEC Co-Enforcement Directors Stephanie Avakian and Steven Peikin and CFTC Enforcement Director James McDonald, who noted:

“When market participants engage in fraud under the guise of offering digital instruments – whether characterized as virtual currencies, coins, tokens, or the like – the SEC and the CFTC will look beyond form, examine the substance of the activity and prosecute violations of the federal securities and commodities laws. The Divisions of Enforcement for the SEC and CFTC will continue to address violations and bring actions to stop and prevent fraud in the offer and sale of digital instruments.”

In one case, the CFTC alleged that Dillon Michael Dean from Colorado and his company, Entrepreneurs Headquarters Limited, collected more than $1.1 million in bitcoin from over 600 people as part of a pooled investment vehicle for trading commodity interests. The pool was said to invest in binary options contracts, according to the complaint. However, the CFTC alleged that the defendants misappropriated the funds.

In the second case, Patrick Kerry McDonnell from New York and the company CabbageTech, are being sued by the CFTC for allegedly absconding with customers’ digital assets…

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