Crypto Investment Schemes in Trouble As CFTC Files Suits for Alleged Fraud

Many of the cryptocurrency investment schemes have put themselves in trouble as the U.S. Commodity Futures Trading Commission has filed suits against them for alleged fraudulent cryptocurrencies and defrauding several investors and its customers.

This move comes after the latest wakeup of increased scrutiny from the country’s derivates regulator, in cryptocurrency investment schemes. CFTC has filed the cases in the U.S. federal court in New York North Eastern District. CFTC has currently filed cases against two companies - CabbageTech and the Entrepreneurs Headquarters Limited.

CabbageTech is a New York-based company which operated with the name Coin Drop Market and offered its customers real-time cryptocurrency trading advice along with other asset management services. The complaint filed by CFTC against CabbageTech shows that company founder Patrick K. McDonnell stole all the funds that his clients have entrusted his management and failed to provide any kind of trading advice to its customers.

The complaint shows that after having received the funds, the company management cute off communications with its clients and erased their presence on the web. In a statement, CFTC Director of Enforcement James McDonald said: “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. We will continue to work hard to identify and remove bad actors from these markets.”

In another case, the CFTC has accused The Entrepreneurs Headquarters Limited headed by Colorado resident Dillon Michael Dean for operating a Ponzi scheme in which Dillon is alleged to have solicited $1.1 million worth Bitcoin from over 600 investors under the assurance of developing an investment pool.

McDonald said: “Increased public interest in Bitcoin and other virtual currencies has provided new opportunities for bad actors. 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.”

As per the reports of Reuters, there is also a third case filed by the CFTC against a cryptocurrency investment scheme, the details of which are currently sealed. On Friday, CFTC and SEC issued a joint statement stating that "When market participants engage in fraud under the guise of offering digital instruments – whether characterized as virtual currencies, coins, tokens, or the like – the SEC and the CFTC will look beyond form, examine the substance of the activity and prosecute violations of the federal securities and commodities laws. The Divisions of Enforcement for the SEC and CFTC will continue to address violations and bring actions to stop and prevent fraud in the offer and sale of digital instruments.”