U.S. Judge Slaps Bitcoin Fraudster with $1.9 Million in Penalties

July 24, 2018 01:30 UTC

The United States Commodity Futures Trading Commission (CFTC) has successfully prosecuted a bitcoin fraudster in connection with his criminal bitcoin investment program, which he used to extract hundreds of thousands of dollars from his victims.

Announcing the successful case in a press release, the CFTC revealed that on July 9, 2018, Dillon Michael Dean of Longmont, CO, and The Entrepreneurs Headquarters Limited, his registered company, were ordered to pay more than $1.9 million in civil monetary penalties and restitution.

‘Misappropriated Funds’

According to the Order and Default Judgment delivered by Judge Sandra J. Feuerstein of the U.S. District Court for the Eastern District of New York, Dean and TEH dishonestly solicited bitcoin investments from the general public using false promises of fund pooling and investment in binary options.

After collecting funds from investors this way, Dean misappropriated their funds, converting them to personal use without the investors’ knowledge. Going further, the judgment stated that, unlike what he told investors, Dean was never registered with the CFTC as a Commodity Pool Operator (CPO) and Associated Person of a CPO, as required by law.

Carrying on this illegal operation from April 2017, the court found that Dean obtained at least $499,264.04 in investor bitcoin funds from not less than 127 people. His pitch to investors was that he would convert their bitcoin to fiat, which he would then invest on their behalf.

The suit against Dean was brought by the CFTC.

Dean told investors that he would invest their funds in a pooled investment vehicle created to trade commodity interests, including trading binary options on an online exchange designated as a contract market by the CFTC.  He convinced them to part with their money by quoting fictitious trading expertise and promising them fantastic investment returns.

Once he got their money, rather than do any of what he promised, Dean would misappropriate their bitcoin funds, taking advantage of the pseudonymous nature of the cryptocurrency to get away with the theft. Over the course of the scheme, at least 120 people fell victim, losing a total of $432,184.79.

The court heard that Dean used company websites, YouTube videos and Facebook posts to fish for victims. In these posts and videos, he made several false claims including a fictitious record of successful options trading and absurdly high rates of return from trading options. Every single claim he made was false, however, and Dean never actually engaged in a single trade on behalf of a customer.

Restitution, Fine and Warning

The court ordered Dean and TEH to pay the sum of $432,184.79 in restitution to the customers he fleeced, and a $1,497,792.12 civil monetary penalty. In addition, the judgment imposes a permanent trading and registration ban on Dean and TEH and permanently enjoined both defendants from future violations of CFTC regulations and the CFTC Act.

The agency, however, warned the public that the imposition of a restitution order is not a guarantee that funds obtained fraudulently will actually be recovered, depending on the financial status of the defendant.

Images from Shutterstock

Last modified: July 24, 2018 00:06 UTC

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@DavidHundeyin

I am a busy Nigerian writer, journalist and writer with an interest in tech and finance. When I'm not contributing to CCN and traveling around Africa, you can catch me contributing to CNN Africa, or in the writers room at 'The Other News', Nigeria's weekly answer to 'The Daily Show' with nearly 2 million viewers. My work on 'The Other News' was featured in the New Yorker Magazine, and that was then cited in the Washington Post so I'm not sure that counts as a feature but I'll definitely mention it too! I have been nominated by the US State Department to take part in the 2019 Edward R. Murrow Program for journalists under the International Visitors Leadership Program. I also like hamsters. You can reach me on Twitter at _David_Hundeyin