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CFTC Files Fraud Suits Against Cryptocurrency Investment Schemes

Last Updated March 4, 2021 5:03 PM
Josiah Wilmoth
Last Updated March 4, 2021 5:03 PM

The US Commodity Futures Trading Commission (CFTC) filed charges against several cryptocurrency investment schemes for allegedly defrauding customers and investors.

The suits, which were filed on Thursday in US federal court in New York, accuse CabbageTech and the Entrepreneurs Headquarters Limited of engaging in fraudulent practices to obtain cryptocurrencies from investors.

CabbageTech, which operated under the name Coin Drop Markets, was a New York company that purportedly offered real-time cryptocurrency trading advice as well as asset management services. The complaint alleges that CabbageTech owner Patrick K. McDonnell failed to provide the promised trading advice to customers and stole funds that clients had entrusted to his management.

The complaint alleges that, after receiving the funds, the defendants cut off communications with customers and erased their internet presence.

“This action is among the latest examples of the CFTC’s continuing commitment to act aggressively and assertively to root out fraud and bad actors involved in virtual currencies,” CFTC Director of Enforcement James McDonald said in a statement. “We will continue to work hard to identify and remove bad actors from these markets.”

In the second case, the CFTC alleged that Colorado resident Dillon Michael Dean, along with his UK-registered company The Entrepreneurs Headquarters Limited, had operated a Ponzi scheme in which he solicited and misappropriated at least $1.1 million in bitcoin from more than 600 investors under the guise of establishing an investment pool.

“Increased public interest in Bitcoin and other virtual currencies has provided new opportunities for bad actors, McDonald said. “As this case shows, the CFTC will continue to take swift action to stop such fraudulent schemes and to hold fraudsters accountable for their misconduct.”

Reuters reported  that the CFTC filed a third suit against a cryptocurrency investment scheme, but the details of that case are currently sealed.

The suits come as US regulators have been eyeing the cryptocurrency ecosystem with increased scrutiny.

On Friday, the CFTC and US Securities and Exchange Commission (SEC) issued a joint enforcement warning stating that they will continue to patrol the cryptoasset markets and “look beyond form, examine the substance of the activity and prosecute violations of the federal securities and commodities laws.”

CFTC Chairman J. Christopher Giancarlo, meanwhile, reportedly  said at an industry conference that he had instructed his staff to develop a “heightened review process” for bitcoin futures and other cryptocurrency-related derivatives.