The US Commodity Futures Trading Commission on Tuesday announced a final judgment order issued by a New York federal court to settle fraud charges against a commodities pool operator who was charged with operating a fraudulent scheme.
The CFTC has accused a Colorado businessman and his UK-registered company of violating trading regulations and defrauding at least 600 customers of more than $1.1 million.
The order requires defendants to pay to pay over $1.9 million in civil monetary penalties and restitution.
The detailed complaint alleges that the fraud scheme has been going on since at least April 2017 and involved fraudulent ad campaigns that used false promises to induce clients to send their bitcoins to participate in binary options trading pools and other investments, but in fact, they were duped into investing in a Ponzi scheme.
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A Ponzi-style scheme
The CFTC’s charges were unsealed earlier in January in federal court in the Eastern District of New York, against Dillon Michael Dean and the company he controls, The Entrepreneurs Headquarters Limited, an enterprise that takes investment in the form of Bitcoin and uses the money to trade various instruments.
Longmont-based Dean took the digital coins from investors to be converted into fiat currency and then channeled into a pooled investment vehicle for trading commodities, including binary options.
To create the illusion of stability, the defendants allegedly prepared and distributed false account statements to fund participants, telling investors that they made steady gains from trading commodity interests, according to the complaint.
The defendants falsely told their customers, among other claims, that they offer a safe investment with steady and guaranteed returns. Dean solicited pool participants by falsely representing to them the purported success of his personal investments and that he had “strong skills” in options trading.
Additionally, to shore up the fraud, he used a Ponzi-style scheme in which he issued payments to investors that he claimed represented profits but were, in fact, other investors’ funds.