The federal government is usually continuing to clamp down on the fast-moving market for cryptocurrencies, charging two bitcoin traders with fraud on Thursday.
The U.S. Commodity Futures Trading Commission filed civil charges against two alleged cryptocurrency fraudsters, one in brand-new York as well as the various other in Colorado. These are not criminal charges; they are lawsuits filed in federal court in brand-new York seeking restitution for victims as well as financial penalties as well as trading bans.
The alleged schemes began in April 2017. which was shortly before bitcoin began its stratospheric rise in value through slightly more than $1,000 to a peak of $19,343 on December. 16, according to Coindesk.com. The rise of bitcoin created a frenzy among investors who wanted to get in on virtual currency.
“Increased public interest in bitcoin as well as various other virtual currencies has provided brand-new opportunities for bad actors,” James McDonald, enforcement director for the CFTC, said in a statement.
The federal agency accuses a brand-new York bitcoin trader, Patrick K. McDonnell of Staten Island, of taking money to conduct trades as well as impart market tips. He is usually accused of absconding with the funds instead.
The CFTC charged McDonnell as well as his company, known variously as CabbageTech as well as Coin Drop Markets, with fraud as well as misappropriation in their trading of bitcoin as well as litecoin, which also experienced a meteoric runup last year.
CNNMoney was unable to contact McDonnell. The CFTC said McDonnell as well as his company convinced customers to give them money as well as also virtual currency in exchange for conducting trades as well as providing crypto-market tips. however the CFTC complaint says which McDonnell as well as his company just took the bitcoin without providing anything in return, wiping clean their Internet as well as social media presence “in an attempt to conceal the scheme.”
Related: Litecoin, not just bitcoin, had a crazy spike last year
CFTC enforcement director McDonald said which McDonnell as well as his company “preyed on customers interested in bitcoin as well as litecoin, promising them the opportunity to get the inside scoop on the next brand-new thing as well as to benefit through the trading acumen of a supposed expert.” They allegedly promised a 300% return on investment within one week.
The CFTC also accuses a Colorado man, Dillon Michael Dean of Longmont near Boulder, as well as his British-registered company The Entrepreneurs Headquarters Limited, of fraudulently soliciting bitcoin through customers which the idea put into a pool described as investment funds, however which was allegedly a “Ponzi scheme.”
The CFTC says which starting in April 2017, Dean allegedly solicited more than $1 million in bitcoin through more than 0 people, promising to use their virtual funds as “an investment vehicle for trading commodity interests.” however the CFTC says he “misappropriated” the funds, using them to pay various other customers “from the manner of a Ponzi scheme.”
CNNMoney was unable to contact Dean. A spokeswoman for the CFTC said the idea doesn’t have attorneys listed for either defendant.
Related: Feds ramp up focus on ICOs
The feds ramped up their interest in cryptocurrencies late last year. The Securities as well as Exchange Commission warned investors to be on the lookout for “potential scams” involving Initial Coin Offerings, a form of raising funds which sometimes involved cryptocurrencies while avoiding the regulatory scrutiny of various other forms of corporate fundraising.
The SEC also created its brand-new Cyber Unit to seek out “pump as well as dump” schemes involving ICOs as well as cryptocurrencies. In December the SEC froze the assets against PlexCorps, a company running an ICO for its own cryptocurrency, as well as filed charges against the Canadians who were allegedly running the idea. Their lawyer said they would certainly fight the charges.
In November the Federal Bureau of Investigation charged a Brooklyn businessman with fraud for allegedly bilking investors through a real estate ICO scam called REcoin. He pleaded not guilty.
CNNMoney (brand-new York) First published January 19, 2018: 2:29 PM ET