The US Commodity Futures Trading Commission (CFTC) is the latest financial watchdog to haul into court companies in the virtual currency space.
On Friday, the CFTC, which oversees the derivatives markets in America, announced a pair of civil lawsuits against businesses it claims defrauded customers out of their hard-earned wonga with cryptocurrency get-rich-quick schemes.
UK-registered business Entrepreneurs Headquarters Limited and its CEO Dillon Michael Dean, of Longmont, Colorado, are accused of running a Bitcoin investment plan that was actually a front for a classic Ponzi scheme.
The CFTC alleged that starting in April of last year, the biz had presented itself as a Bitcoin investment service that used the cryptocurrency it collected from investors to purchase binary options.
Rather than actually invest the Bitcoin, Dean and his organization were instead using the money they got from one pool of investors to pay out others, the commission told a New York district court in a filing this week.
In total, the CFTC believes the scheme netted $1.1m worth of Bitcoin from about 600 people when it stopped paying out. The watchdog said that Dean has since launched another investment company.
“Increased public interest in Bitcoin and other virtual currencies has provided new opportunities for bad actors,” says CFTC director of enforcement James McDonald.
“As alleged in the Complaint, Defendants sought to take advantage of that public interest, offering retail customers the chance to use Bitcoin to invest in binary options, when in reality they were only buying into a Ponzi scheme.”
In addition to restitution and damages for the investors, the CFTC is seeking civil penalties and trading bans against Dean and his company.
Data provided by theregister.co.uk