US trader fined £1.4m for Bitcoin fraud scheme

A US court has fined a commodity pool operator and its principal more than $1.9 million (£1.4 million) for fraudulently soliciting Bitcoin from members of the public.

Between April 2017 and January 2018, Dillon Michael Dean and The Entrepreneurs Headquarters (TEH), Dean’s UK-registered company, solicited at least $499,264 (£380,821) worth of Bitcoin from around 127 people.

They promised to convert this Bitcoin into fiat currency to invest on their customers’ behalf in a pooled investment vehicle for trading commodity interests, including trading binary options on an online exchange. Instead, they misappropriated their customers’ funds, resulting in at least 120 customers suffering total losses of approximately $432,185 (£329,656).

Dean and his firm solicited the funds using company websites, YouTube videos and Facebook posts, where they claimed customers’ money would be pooled and invested in commodity options. They claimed Dean had “strong skills” in options trading and that they were generating high rates of return through trading commodity options.

In reality, the defendants never actually traded on behalf of their customers and their purported trading profits were fictitious. In addition to requiring the defendants to pay $432,185 in restitution to customers and a $1,497,792 (£1,142,562) civil monetary penalty, the judge imposed permanent trading and registration bans.

The Commodity Futures Trading Commission (CFTC) says orders requiring the repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. “The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable,” it says.